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October 15, 2018

This past Thursday, a Senate committee convened a hearing on cryptocurrency and blockchains that had all the allure of an Ultimate Fighting Championship matchup. The two witnesses voiced opposing viewpoints in the Great Crypto Debate: a heated dispute about whether cryptocurrencies like Bitcoin are a fraud or the future. (I was reminded of a similar showdown that recently took place in Mexico City.)

The delegate for the killjoys was Nouriel Roubini, an economics professor at New York University known as “Dr. Doom” for his glum outlook on the global economy as well as his prescient prognosis of the Great Recession in 2006. At the outset of his speech, Roubini labeled crypto as “the mother or father of all scams and bubbles.” He knocked “blockchain,” the computerized ledgers upon which cryptocurrencies such as Bitcoin are based, as “the most overhyped technology ever” and, planting an uppercut, added, “it is no better than a glorified database.”

Roubini’s challenger—the Conor McGregor to his Khabib Nurmagomedov—was Peter Van Valkenburgh, an actor-turned-lawyer who directs research at Coin Center, a crypto-focused think tank. Unfazed by Roubini’s pummeling, Van Valkenburgh described Bitcoin as “revolutionary” and related blockchain technology as “our best hope” at building more secure digital infrastructure. “Is it perfect? No,” Van Valkenburgh said, feinting at his opponent. “But neither was email when it was invented in 1972.” Delivering a roundhouse to the jaw, he added: “It’s a computer science breakthrough and it will be as significant for freedom, prosperity, and human flourishing as the birth of the Internet.”

The fight was full of satisfying moments, when each pugilist landed blows. Roubini shot holes through crypto proponents’ self-proclaimed goal of “decentralization,” saying that public blockchain infrastructure and mining equipment is concentrated “in authoritarian countries, like China and Russia.” Van Valkenburgh disagreed with the implication that these countries can manipulate the system; and he countered that present payment technology, such as the WeChat app in China, is already a “tool for totalitarians,” since the Chinese government can use it to inspect any user’s financial records.

There were humorous, if puzzling, moments too, such as when Roubini praised a cartoon to illustrate a point. “Even the Flintstones knew better than crypto,” he said, since the show’s Stone Age characters used clamshells as currency instead of Bitcoin.

As entertaining as this altercation was, it held no candle to the combat that followed the fight. Like the recent mixed martial arts contest between McGregor and Nurmagomedov, the feud spilled out of the ring. Roubini has continued his trash-talking on Twitter, dunking on crypto boosters and calling the industry a “cesspool of shitcoins.” He even picked a fight with Vitalik Buterin, the twenty-something creator of Ethereum, saying the entrepreneur founded a “criminal…scam,” that he is a “disingenuous” peddler of “vaporware,” and commanding Buterin to “just shut up.” (Buterin had knocked Roubini’s credentials too.)

As is often the case with such debates, the outcome is in the eye of the beholder. Are you an optimist who believes the technological challenges can be overcome? Or are you a skeptic who believes the obstacles are insurmountable, and that greedy charlatans are using the opportunity to fleece unwitting investors? Both sides are likely right—despite their hyperbolic tendencies.

We will continue chronicling this quarrel until a trouncing or triumph materializes. With no clear victor as yet, expect this grudge to smolder.

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Robert Hackett
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robert.hackett@fortune.com
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THE LEDGER'S LATEST

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Why Someone Put a Giant, Inflatable Bitcoin Rat on Wall Street, Facing the Federal Reserve Bank by Kevin Kelleher

Bitcoin Is No Safe Haven as Cryptocurrencies Join the Global Market Selloff by Bloomberg

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DECENTRALIZED NEWS

To the Moon… Fidelity gets into crypto. China minted 13 crypto billionairesCrem de la crem colleges are investing in crypto. Bitcoin Cash proponent Roger Ver considers opening a crypto exchange. A fifth of the 600 hedge funds set to debut this year will focus on crypto. A new crypto VC fund worth $100 million just launched. A stunningly wealthy plastic surgeon upped his stake in Korean crypto exchange Bithumb. Swiss regulators continue to be very crypto-friendly. We've entered a crypto renaissance.

…Rekt. Crypto prices get crushed. SEC "tightens the noose" on ICOs. Bitcoin crashes alongside stock market. Fintech is not a threat to banks. Coinbase activity drops 80%—and the company makes a pivot. Barclay's is bailing on crypto trading. Cops nab crypto thief. Crypto thefts reach $1 billion. No one understands how the blockchain will save journalism. Venmo raises fees. "Proof of Stake" has critics. "Bitcoin must die."

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BALANCING THE LEDGER

☝ Click to view.

We'll be shooting our show Balancing The Ledger every other week for a little while. Instead, here's a clip of me interviewing R.J. Pittman, former chief product officer at eBay and alum of Apple and Google, at Ripple's Swell event in San Francisco the other week. During our discussion about the future of commerce, Pittman said that blockchains are "effectively the TCP/IP of moving value," referring to a protocol that knits computers into that global information network we know as the Internet. He also said that cryptocurrency faces a big branding challenge, and that companies should "invest in positioning the importance" of it.

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BUBBLE-O-METER

Heigh-ho, heigh-ho, it's off to work we go. Can you make money as a Bitcoin "miner"? If you're paying retail electricity prices, then probably not. Diar, a cryptocurrency news outlet, crunched the numbers and determined that this side hustle became recently unprofitable thanks to falling cryptocurrency prices as well as the network's record high hash rate, a measure of how much power Bitcoin consumes.

Crypto news outlet Diar

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MEMES AND MUMBLES

Leave a message after the beep. In an advertisement for Google's new Pixel 3 phone, the search giant takes a swipe at cryptocurrency. While demonstrating a feature that screens calls, the actors discuss the cost of mining cryptocurrency. "Cryptocurrency, that money's not real," the woman says. "Yeah, well I got news for you—money isn't real," the man responds. "You gonna live that lie?" she asks.

Google Pixel 3 advertisement. Made By Google/YouTube

Say, remember that time Google banned cryptocurrency ads?

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FOMO NO MO'

Don't miss out: War-torn Ukraine sees potential in cryptocurrency to help rebuild its economy. The country's citizenry combines tech chops with a historic distrust of the state, as this Bloomberg Businessweek report notes. Various factions of political insurgents have used Bitcoin and other cryptocurrencies to fund their operations, while businesses are adopting them as a means of paying wages. Read on about the region's crypto dreams and disillusionments.

The spot where a statue of Lenin once presided over Kyiv's downtown is now in a state of mild decrepitude. The plinth remains, but it's covered with graffiti, its steps painted the blue and gold of the Ukrainian flag. After protesters triumphantly toppled the statue in December 2013, the vacant pedestal served as a memorial to Ukraine's violent rejection of its Soviet past.

Since late September, though, the spot has had a new occupant—of sorts. If you point your phone at the pedestal, an app will show you an augmented-reality rendering of the person some say symbolizes the country's future: Satoshi Nakamoto, the anonymous inventor of Bitcoin.

We hope you enjoyed this edition of The Ledger. Find past editions here, and sign up for other Fortune newsletters here. Question, suggestion, or feedback? Drop us a line.

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