Nobel Prize Winner Eugene Fama on Bitcoin

This week the Bitcoin Uncensored Podcast with Junseth and Chris Derose interviewed the winner of the 2013 Nobel Prize in Economics, Eugene Fama. Bitcoin Uncensored has given Cointelegraph the first peek at the interview so that we could publish it for the greater Bitcoin community.

Professor Fama is the father of Modern Finance, and one of the biggest proponents of what is known as Efficient-Market Hypothesis (EMH), which states that markets are efficient and that their information is broadcast in their current price. In its different forms this also means that it is impossible to “beat the market”, and that technical analysis of stock markets is ineffective.

This is basically saying that it is impossible to buy undervalued stock or sell it a higher rate, making arbitrage an illusion. The EMH hypothesis is very close in conception to the mathematical random walk hypothesis, that states that prices follow a random pattern. Random patterns are unpredictable by nature, so then the arrive at the same conclusion.

Bitcoin Uncensored: Hello Professor Fama.

Eugene Fama: Hello.

BU: To begin with, what do you know about bitcoin?

EF: Ohhh. I have a cursory knowledge of it. To me it seems like I really don’t know the difference between bitcoin and a checking account. I read all these papers in the 80s about how when you conduct transactions to a bank you check a wire that’s really just an accounting system for exchange...running in the background to clear accounts. And it seems that bitcoin is pretty much the same thing. It’s an accounting system of exchange. I don’t know, maybe it’s a better protocol or whatever, but I don’t really know the difference between the two.

BU: Well, there’s a lot of ways to explain the differences. but right at the top, the existing settlement solutions are solutions by the way of a centralized authority such as the bank or such as some clearing house.

EF: But really, it’s just a computer.

BU: Correct. But it’s also a computer tied to censorship and subject to moderation, which is unlike cash.