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Modern Economic Nonsense — Today’s fear, tomorrow’s cheer

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We all knew the economy is going down 👇, and the best thing is you do not have a choice but to go down with it. What if you have an option to choose not to?

The financial world is entering an era of digital transformation, driven by advancements in software, data analytics, and artificial intelligence, as well as the growing adoption of mobile apps and Internet-connected devices. This digital revolution is transforming almost all sectors — including finance. Non-bank FinTech companies are gaining market share by providing innovative digital financial services that respond to the needs of customers in a faster and more cost-effective way than traditional banks. Financial services companies must adapt their business models to compete in this new environment or risk becoming obsolete. Understanding how blockchain is changing finance and accelerating the fourth industrial revolution will give you a clearer picture of how investments might perform in the future. In this article, we explain why Bitcoin has a chance to become the new global reserve currency if you are still worried about the bear market.

Why Bitcoin May Become the Global Reserve Currency

For multiple reasons, Bitcoin has a chance to become the new global reserve currency. 

1️⃣ First, the demand for Bitcoin is growing in large emerging markets such as Africa and Asia. 

2️⃣ Second, the supply of Bitcoin will soon be capped at 21 million, which will drive the price up. 

3️⃣ Third, Bitcoin is becoming an asset class in its own right, with investor demand increasing as the price of Bitcoin rises. 

4️⃣ Fourth, governments are showing increased interest in cryptocurrencies as a source of capital. Some governments, such as Venezuela, Turkey, and Russia, are turning to Bitcoin as a way to circumvent Western economic sanctions. 

5️⃣ Finally, the increasing number of institutional investors trading in Bitcoin is likely to drive demand higher. To meet this growing demand, more and more financial institutions are offering cryptocurrency-related products, such as exchange-traded funds (ETFs) and Bitcoin futures. More than 80% of Fidelity’s wealth-management clients now want to know more about cryptocurrencies. This growing institutional demand will drive the price of Bitcoin up even further and increase the legitimacy of cryptocurrencies as an asset class.

Pros of Bitcoin Becoming a Global Currency

If Bitcoin becomes the new global standard for currency, it will have many advantages over traditional currencies. 

1️⃣ First, it would be much harder for central banks to manipulate the value of Bitcoin compared to fiat currencies. 

2️⃣ Second, Bitcoin transactions are cheaper, faster, and more reliable than legacy payment systems. 

3️⃣ Third, unlike fiat money, Bitcoin cannot be mismanaged by central bankers, misappropriated by government officials, or become unbacked by gold reserves. 

4️⃣ Fourth, Bitcoin is more transparent than fiat currencies because the blockchain ledger shows where every coin came from and where it went. 

5️⃣ Fifth, Bitcoin is more secure than the current payment infrastructure because it is decentralized rather than centralized like the credit card system. 

6️⃣ Sixth, Bitcoin is based on distributed systems that are less prone to cyberattacks. Seventh, the supply of Bitcoin is transparent, predictable, and finite.

Cons of Bitcoin Becoming a Global Currency

If Bitcoin does become the new global reserve currency, there will be many drawbacks for the global economy. 

1️⃣ First, a Bitcoin standard would benefit a few large Bitcoin holders but hurt the rest of the world. 

2️⃣ Second, a Bitcoin standard would create a single point of failure. If the Bitcoin blockchain were hacked or destroyed, the entire system would be brought down. 

3️⃣ Third, the current payment infrastructure is more efficient than blockchain technology, which would be rendered obsolete by a Bitcoin standard. 

4️⃣ Fourth, a Bitcoin standard would give a few large mining companies excessive power over the entire world economy. 

5️⃣ Fifth, a Bitcoin standard would be deflationary, which would harm consumers and the global economy by reducing spending demand. 

6️⃣ Sixth, a Bitcoin standard would cause rising trade wars between nations that hold large stocks of fiat currency and those that hold stocks of Bitcoin.

Bitcoin as a Native Currency for Electronic Commerce

Bitcoin has the potential to become the new global reserve currency for electronic commerce. The current payment infrastructure is expensive and inefficient. The infrastructure requires banks to verify the authenticity of goods, maintain the authenticity of paper receipts and provide insurance for shipments. If a Bitcoin standard were implemented, companies would no longer need to provide these services. Consumers would be able to verify the authenticity of goods and services, manage their receipts, and provide their own insurance for shipments simply by scanning a QR code with their smartphones. Bitcoin will make all forms of electronic commerce cheaper and easier to manage. This will open up new avenues for small businesses to participate in global trade and will reduce the costs of outsourcing for multinational enterprises.

Conclusion

As financial institutions transform their operations to meet the needs of the digital age, they are increasingly adopting blockchain technology. Blockchain offers a cheaper, faster, and more secure way to process financial transactions, store data, verify identities and make payments. If the current trend holds, Bitcoin has a chance to become the new global reserve currency, with all the advantages and drawbacks that come with this status.

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Crypto Research

What if you regret your crypto transaction

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Defi hacking is a pandemic now. We lost $2.2B this year, which marked the worst year of the crypto losses despite the fact that we are at the bear market, in which the market capital has shrunk to $1 trillion.

There are a few solutions that can prevent hacking. One of them is creating reversible transactions on Ethereum.

Ah, it goes back to the debate on blockchain trilemma.

If you ever noticed the old debate on blockchain trilemma, you realize these three elements control how a perfect blockchain works: security, decentralization, and scalability.

https://www.ledger.com/academy/what-is-the-blockchain-trilemma

Lacking one of the three elements will make blockchain unusable.

The idea of decentralization is providing an option to give power to people by using computer governing and to reach a fair and square consensus.

The characteristics of decentralization include:

  • transparency
  • immutability
  • accessibility
  • trustless

The reversible transactions are challenging the decentralization assumption of the blockchain, which sparks debates on sacrificing decentralization to prevent hacking losses.

Is preventing theft more critical than permissionless immutability?

Of course, the proposal is just a suggestion of one possible solution, but I shared some of my ideas about such a proposal.

Utilitarianism

If we only focus on what will work for us, that reversible transactions feature is preferable and can prevent hacking from damaging the crypto project.

Defi hacking is a pandemic now. We lost $2.2B this year, which marked the worst year of the crypto losses despite the fact that we are at the bear market, in which the market capital has shrunk to $1 trillion.

There are a few solutions that can prevent hacking. One of them is creating reversible transactions on Ethereum.

Ah, it goes back to the debate on blockchain trilemma.

If you ever noticed the old debate on blockchain trilemma, you realize these three elements control how a perfect blockchain works: security, decentralization, and scalability.

https://www.ledger.com/academy/what-is-the-blockchain-trilemma

Lacking one of the three elements will make blockchain unusable.

The idea of decentralization is providing an option to give power to people by using computer governing and to reach a fair and square consensus.

The characteristics of decentralization include:

  • transparency
  • immutability
  • accessibility
  • trustless

The reversible transactions are challenging the decentralization assumption of the blockchain, which sparks debates on sacrificing decentralization to prevent hacking losses.

Is preventing theft more critical than permissionless immutability?

Of course, the proposal is just a suggestion of one possible solution, but I shared some of my ideas about such a proposal.

Utilitarianism

If we only focus on what will work for us, that reversible transactions feature is preferable and can prevent hacking from damaging the crypto project.

Liberalism

If we focus on individual freedom rather than preventing losses, we will not trade off from the immutability feature of blockchain to a centralized governing function to reverse transactions.

Virtue Ethics

Of course, stealing is universally wrong. But what if hackers stole funds to save local people from starvation? Then such stealing may not seem so wrong after all.

But if hackers stole funds to get themselves rich and purchased luxury goods, such action would be prevented.

Moral Absolutism

But if you believe stealing is universally wrong, no matter the circumstances, reversible transactions seem an excellent idea.

Moral Nihilism

We may go extreme that moral is no matter in crypto whatsoever, then implementing reversible transactions simply changes nothing.

Theory of Justice

If you think fairness is more important than utility, implementing reversible transactions is an excellent choice to ensure the ecosystem is fair.

Majority Rule

You may also not decide but ask consensus to vote on such changes and implement them upon the majority vote agree upon.

So which one would you like to choose from?

But no matter what you choose, I think crypto is more toward to Majority Rule that consensus will decide what moves forward with decisions everyone votes.

Of course, who controls the voting power is another debate in the crypto ecosystem—this question we will discuss the next time.

Support writer here or join Medium here

Photo by lucas clarysse on Unsplash

If we focus on individual freedom rather than preventing losses, we will not trade off from the immutability feature of blockchain to a centralized governing function to reverse transactions.

Virtue Ethics

Of course, stealing is universally wrong. But what if hackers stole funds to save local people from starvation? Then such stealing may not seem so wrong after all.

But if hackers stole funds to get themselves rich and purchased luxury goods, such action would be prevented.

Moral Absolutism

But if you believe stealing is universally wrong, no matter the circumstances, reversible transactions seem an excellent idea.

Moral Nihilism

We may go extreme that moral is no matter in crypto whatsoever, then implementing reversible transactions simply changes nothing.

Theory of Justice

If you think fairness is more important than utility, implementing reversible transactions is an excellent choice to ensure the ecosystem is fair.

Majority Rule

You may also not decide but ask consensus to vote on such changes and implement them upon the majority vote agree upon.

So which one would you like to choose from?

But no matter what you choose, I think crypto is more toward to Majority Rule that consensus will decide what moves forward with decisions everyone votes.

Of course, who controls the voting power is another debate in the crypto ecosystem—this question we will discuss the next time.

Support writer here or join Medium here

Photo by lucas clarysse on Unsplash

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Crypto Research

The core reason why Defi is not working

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Defi or decentralized finance is an alternative way to traditional finance. It sounds fancy, but it does not work in reality. Here is why:

Securitization

You cannot ignore the innovation of securitization that gives banks a further push on their asset management and expand their operation into more risky asset management in modern finance.

In the past, banks heavily relied on deposits from users, but with securitization, banks can turn illiquid assets into liquidated assets while raising more cash to make more loans.

In theory, a bigger pool with more loans can reduce default rates and make such financial instruments more secure.

In reality, it will trigger a chain reaction and melt down the entire finance in a second.

What makes security secure?

It is a way to make the default rate as accurate as possible, giving a higher security grade than the lower ones.

A lower grade of loan means a higher potential of default because there are not as straightforward as of default rate whoever originated can be calculated. 

There are many ways to calculate loan grading however, there are some factors, include:

  • The borrower’s credit history.
  • Quality of the collateral.
  • The likelihood of repayment of the principal and interest.
  • Cash flow of borrower that can sustain

Defi’s assumption

The loan grade is automatically low when you allow everyone to get loans from the smart contract without sharing financial background because there is no information about how likely the loan will be the default.

Also, the pool is open to all who can get in and out quickly, which makes it even harder to provide sustainable management of such loans.

Defi is very similar to subprime Morgage-backed securities.

The digital finance product is like a shell company with fake value stocks that attract investors to buy in with the high return rates and risk of defaulting at any time.

There is no innovation in preventing default rates but in speeding up cash flow transactions.

Defi only conveniences the money pooling process but has not improved the prevention of possible default and provided sustainable solutions for long-term gains. Instead, it just repackaged the bad loans and sold them for liquidity.

And even worse, Defi will have no mechanism to force investors to repay loans.

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Photo by Akinori UEMURA on Unsplash

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Crypto Research

When fiat currency is volatile

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Cryptocurrency may not promise you to become rich immediately, but it did foresee the worst scenario of the fiat currency – uncontrollable inflation that makes fiat currency unstable. 

We knew it would happen, but it just did not happen as quickly as we imagined dating back to 2008.

Inflation is climbing into the most dangerous zone in decades:

These types of inflation usually will never occur unless we were:

✅ at war

✅ at the trade war

✅ at the political turmoil

✅ at the economic crisis

✅ at the energy crisis

✅ at the challenge of new power

✅ at the currency transition

In the meanwhile, governments are doing a business-usual.

While the currency crisis intends to repeat itself, it will get worse,

Or maybe not…

Or maybe yes…

Okay, the point is, why is the currency in crisis mode?

It is unresponsible for massive spending that gets out of control from central banks.

Who is paying the bill after the math?

Do you want to guess it?

What is the bright side of the development of the currency crisis?

I have seen no light in the tunnel in the coming years, but it does not mean we are out of any solutions. I just have not yet seen anything.

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Photo by Breno Machado on Unsplash

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