The New Market for Lemons

Ever buy a used car only to realize later that you’ve purchased a lemon? That scenario occurs because of information asymmetry between the seller—who knows the car is a lemon—and the buyer who doesn’t. Without transparency, the market assumed that any used car for sale is a lemon, so that drove down the price of good used cars. The good news is that thanks to the Internet, buyers now have access to data that can help them determine if a car is a lemon or a good buy.

In the multibillion-dollar world of cryptocurrencies, information asymmetry is an inescapable and unchecked phenomenon and, unlike in the market for used cars, there is little consumers can currently do about it.

Crypto is founded on information…

Source link