Here is a link to the podcast episode if you want to give it a listen first: https://www.whatbitcoindid.com/podcast/debunking-economics-and-why-bitcoin-will-fail-with-steve-keen.
As brilliant of an economist as Steve Keen is, the “fatal” flaws of Bitcoin he pointed in this interview can be easily debunked.
Keen agreed that the current financial system is due for major changes and he was already sure of it even in the 1990s. He argued that our current financial system is run on credit -based demand. Essentially, credit creates money and people use money to buy things. Therefore, credit creates demand in our economy which is not a sustainable ecosystem.
However, when asked whether Bitcoin could potentially change the monetary system, Keen was adamant that Bitcoin would fail for two reasons: low transactions per second and high mining costs. However, Bitcoin the base layer was never created for people to buy coffee with because the transaction fee could be higher than the coffee itself. Instead, Bitcoin was designed to still be an affordable exchange platform when transactions are worth hundreds of millions of dollars. People initiating these large transactions need only to pay minimal fees (around the same as buying a cup of coffee) for them to go through and reach finality. Thus, the current 7 transactions per second are more than enough considering its designed purposes. Furthermore, there are second-layer technologies like Lightning being developed to facilitate small transactions off chain and settle back on chain when transactions between two parties are finalized.
As for the second argument, the electricity dedicated to mining Bitcoin can indeed run a small country. It is terrible for the environment considering the effects of global warming are becoming more and more tangible. The electricity is being used to protect the system from bad actors by solving mathematical puzzles with computational power. The history of a blockchain is so significant that every transaction on the chain can be traced back to the “genesis” transaction because new transactions created need to be referred back to ones before them, and thereby creating a “chain” of transactions. As the history of Bitcoin grows, the cost of protecting it actually decreases because the same amount of electricity is being used to provide protection over a ledger whose intrinsic value is ever-increasing with each valid transaction.
Dr. Keen’s concerns are fairly prevalent among scholars and they are always pushing the technology to be better and more efficient. The fate of cryptocurrencies will always remain unknown to us until the end but the movement of decentralization has already been triggered and there is no stopping it.