The American city of Miami is known for its attitude against institutional finance, or it looked like this during the period from June 4 to 5 this year. At that time, a total of 12,000 people dressed in suits, ceremonial costumes and whale hats attended the world's largest Bitcoin conference. Cryptocurrency gurus like Jack Dorsey enthusiastically praised those who are serious about pursuing wealth and freedom, and when El Salvador’s President Naib Bukler announced the country’s plan to legalize Bitcoin, the crowd broke out. There was a commotion.
The British "Economist" pointed out in its report that many currencies listed on stock exchanges are "tokens" and they can become speculative tools. They are different from ordinary currencies and they do not want to realize all the functions of currencies. Security "tokens"-such as stocks and bonds, whose purpose is to invest, represent the ownership of the company or other assets registered in the ledger.
At the same time, tokens related to "public utilities" can be traded. They can be bought or used in exchange for services. For example, cryptocurrency exchanges often sell tokens that gamblers use to pay transaction fees.
However, out of a total of 776 tokens, only nearly 110 tokens have a market value of more than 100 million U.S. dollars. Among them, the strongest competing currencies can be divided into two categories. One is the version represented by "Bitcoin". They are designed to repair the flaws of cryptocurrency and make it a means of payment, while the version represented by "Ether" is designed to play a new role.
One of the problems with Bitcoin is its volatility. For example, within a few hours on May 19 this year, the value of Bitcoin dropped by 30%. In order to avoid such fluctuations, "stable coins" issued by the government have been sought after.
The media added that other versions of cryptocurrencies are trying to solve the privacy issues surrounding Bitcoin because all Bitcoin transactions are recorded on the "blockchain" in a public database, leaving their mark.
On June 7 this year, U.S. officials stated that after discovering the virtual wallets used by hackers, they had successfully recovered the $2.3 million ransom paid to these hackers. In May of this year, these hackers shut down the United States. Lonil Pipeline Transportation Company, and demanded the ransom in the form of Bitcoin. Some digital currencies try to hide the identity of their holders as much as possible by using anonymity technology. For example, "Monero" (Monero) tries to prevent the currency circulation from being linked to a fixed identity, or to prevent tracking funds or monitoring transactions scale.
Other versions of digital currencies still try to make the payment process cheaper and faster, and ensure the legitimacy of transactions without relying on a central authority. Among them, Bitcoin relies on "Proof of Work", and "miners" usually need to verify their transactions through very time-consuming algorithms.
Nevertheless, Bitcoin is based on a design that allows it to process only about 7 transactions per second. Therefore, the creators of "Litecoin" adjusted this algorithm to enable it to process new transactions faster. A set of transactions. In contrast, the supply of "Dogecoin" launched as a joke is still unrestricted.
Choose stable currency or cryptocurrency?
In the face of every defect that it tries to fix, Bitcoin seems to have lost its original desirable attributes. For example, stablecoins require users to trust the issuer (must keep a fixed cash reserve) and the government, which undermines the original design goal of cryptocurrency. In February of this year, the New York authorities imposed a fine of up to 18.5 million U.S. dollars on the issuer of the stable coin Tether, on the grounds that he lied about the US dollar reserve.
Due to concerns about possible money laundering activities, major global exchanges have cancelled the ultra-private cryptocurrency Monero. At the same time, the system of proving equity encourages the storage of currency and limits its liquidity. According to analysts at Brave New Coin Research, these situations may be the reason why there is no version of cryptocurrency that can surpass Bitcoin. The current alternative behaviors, such as those on GitHub, a platform used by programmers to collaborate on projects, can prove that Bitcoin is still very popular.
The media pointed out that the threat comes from smarter "blockchain" currencies, which can achieve more than just recording payments. For example, the public blockchain platform "Ethereum", the second largest digital cryptocurrency "Ethereum" ( Ethereum), you can use automated software to realize the function of transferring funds between wallets after a specific event occurs. The digital currency version represented by "Ether" has become the core of the emerging decentralized financial field. They can run "smart contracts" to simulate complex financial transactions such as providing loans or insurance, without the need for trusted intermediaries.
In the past 12 months, the data company Chain Analysis estimates that the emerging decentralized financial sector has successfully dominated 40% of Ether transactions, an increase of 7% over the previous period, and there are nearly 620 in its application memory. Billion dollars in funding. Decentralized finance is still limited, but it is growing rapidly. As for Bitcoin, because its blockchain cannot run smart contracts, it lacks sufficient advantages to catch up with the momentum of "Ether". On the other hand, the advantages and scarcity of Bitcoin may make it attractive as a monopoly asset. Nevertheless, this may only be a compensation for failure.