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.
