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Why crypto has a fundamental design fault

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Scarcity is the fundamental economic problem of having unlimited wants and needs, but limited resources to fulfill those wants and needs. In other words, it refers to the limited availability of a resource, whether it is a tangible resource like water or oil, or a intangible resource like time or attention.

Because resources are limited, people must make choices about how to allocate those resources in order to satisfy their needs and wants. This often involves trade-offs, where one must give up one thing in order to obtain another. For example, an individual may have to choose between buying a new car or saving money for a down payment on a house.

Scarcity is a fundamental concept in economics, and it affects every person and society. It shapes the way that people make decisions, and it drives economic activity as people try to find ways to satisfy their needs and wants in the face of limited resources.

Does crypto has scarcity

Cryptocurrencies, like many other forms of money, can be thought of as having a certain level of scarcity. This is because most cryptocurrencies have a limited supply that cannot be exceeded. For example, the total number of bitcoins that will ever exist is capped at 21 million, and as of December 2021, around 18.7 million bitcoins have been mined. This limited supply is designed to mimic the scarcity of gold and other precious metals, which are also widely used as money because they are relatively scarce and difficult to produce.

However, it is important to note that the scarcity of cryptocurrencies is not the same as the scarcity of physical resources like oil or gold. Cryptocurrencies are digital assets that exist on a decentralized network, and they are created and transferred using complex algorithms and encryption. While their supply may be limited, they do not require the same level of resources to produce as physical goods.

In addition, the value of cryptocurrencies is not based solely on their scarcity. The value of a cryptocurrency is determined by a variety of factors, including its use as a medium of exchange, the level of demand for it, and the stability of the network on which it is based. As with any asset, the value of a cryptocurrency can fluctuate significantly over time.

How human can manipulate scarcity in cryptocurrency

There are a few ways in which humans can manipulate the scarcity of cryptocurrencies:

  1. Mining: Cryptocurrencies are created through a process called mining, in which computers solve complex mathematical problems to verify transactions on the network. By controlling a significant portion of the mining power on a cryptocurrency network, an individual or group of individuals can influence the rate at which new units of the cryptocurrency are created.
  2. Market manipulation: Cryptocurrency markets are subject to manipulation, just like any other financial market. Market manipulation can take many forms, such as spreading false or misleading information about a cryptocurrency, or engaging in practices like “pump and dump” schemes to artificially inflate the price of a cryptocurrency.
  3. Forks: A “fork” is a split in the blockchain, the decentralized ledger that records all transactions on a cryptocurrency network. A hard fork creates a new version of the blockchain that is incompatible with the old one, while a soft fork is a backward-compatible update to the blockchain. Hard forks can create new, scarce cryptocurrencies if they result in the creation of a new, independent blockchain.

It is important to note that most of these activities are illegal or unethical, and they can have negative consequences for both the individuals involved and the broader cryptocurrency ecosystem.

Can crypto prevent human manipulation of the scarcity 

It is difficult to completely prevent human manipulation of the scarcity of cryptocurrencies, as the decentralized nature of most cryptocurrencies means that there is no central authority that can regulate or control the actions of individuals or groups. However, there are a few ways in which the design of a cryptocurrency can make it more resistant to manipulation:

  1. Proof-of-work algorithms: Many cryptocurrencies, including Bitcoin, use a proof-of-work (PoW) algorithm to create new units of the cryptocurrency and secure the network. In a PoW system, miners compete to solve complex mathematical problems in order to verify transactions and earn rewards. The difficulty of these problems is adjusted periodically to ensure that the rate at which new units of the cryptocurrency are created remains stable. This makes it more difficult for a single individual or group to manipulate the supply of the cryptocurrency.
  2. Decentralized governance: Some cryptocurrencies, like Ethereum, have implemented decentralized governance systems that allow network participants to vote on proposed changes to the network. This can make it more difficult for a single individual or group to manipulate the network in their favor, as they would need to convince a significant portion of the network to support their proposal.
  3. Transparency: Many cryptocurrency networks are designed to be transparent, with all transactions recorded on a public ledger called the blockchain. This can make it easier for network participants to identify and track any attempts at manipulation.

Overall, while it is not possible to completely prevent human manipulation of the scarcity of cryptocurrencies, the design of a cryptocurrency and the actions of its users can play a role in reducing the risk of manipulation.

That is why crypto may not sustain long enough unless it exhausts all possible prevention against human manipulations.

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Crypto Research

Mother of all bubble

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We are heading into a bubble economy and there is one that is about to pop.

ChatGPT suggests that a financial bubble is:

A financial bubble is a situation in which the price of an asset, such as a stock or a commodity, becomes artificially inflated due to excessive speculation and investment. This can lead to a situation where the market becomes overvalued and eventually collapses, resulting in significant losses for investors. Bubbles can occur in a variety of different markets and can be caused by a number of factors, including low interest rates, economic growth, and investor sentiment.

Let’s take Tesla as an example.

Tesla CEO is Elon Musk, who purchased Twitter last year and believed the company can help Tesla to make more profits.

Does it? Or he tried to inflate Tesla instead?

If you go to Twitter, there is less opposition than a supporting voice.

Elon Musk sells Tesla cars and Tesla stocks.

People purchase cars to help pump the stock price and when stock price goes up, people want a new Tesla.

Despite all the bad reviews about the car and its questionable autopilot feature, Tesla cars sold quickly and stock goes up no question.

Is this a Ponzi scheme?

Similarly, cryptocurrency is also highly speculative.

It goes up a time to time, but people buy the narrative without further investigating how useful the crypto really is.

What if people stop buying the crypto, will that still go up?

What if the economy is so bad and the interest rate is high that people have less money to buy more crypto?

We will see how it goes.

Photo by Pawel Czerwinski on Unsplash

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Crypto Research

One more thing NFT can do

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California will have a pilot program to use NFT to record car titles as an innovation of record management. 

ChatGPT stated NFT is:

NFT stands for “non-fungible token.” It is a digital asset that represents ownership of a unique item or piece of content, such as a digital art piece or collectible. NFTs are created and stored on a blockchain, which is a decentralized digital ledger. This allows for the creation and transfer of ownership of digital assets in a secure and verifiable way.

Finally, the government has realized the use of the blockchain, and it will reduce government spending while providing more accurate information to citizens.

I think blockchain has more utilities other than money. Digital money is the first step in testing society’s compatibility, but the blockchain should focus more on providing services rather than investing to people.

That blockchain service can be essential for society later rather than simply going to moon-style investments to create unsustainable pump and dump.

Such government collaboration is the first step to making blockchain a social system.

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Crypto Research

Why Ethereum killers are killing themselves

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Ethereum killers are killing themselves!

ChatGPT described the Ethereum killer as:

Ethereum killers refer to other blockchain projects that aim to surpass Ethereum in terms of features and adoption. While there have been many projects that have attempted to do so, Ethereum remains one of the most widely used and well-established blockchain platforms. Additionally, Ethereum is continuously evolving and implementing new upgrades to its network, making it difficult for other projects to truly “kill” it. However, it is important to note that the crypto and blockchain space is highly competitive and constantly evolving, so it’s possible for new projects to gain traction and potentially challenge Ethereum’s dominance in the future.

But they missed several points.

When those killers market themselves are better choices, they forget the on-dock experience that allows developers to transit from one blockchain to another.

There is no way you can ask developers to abandon their existing projects and choose your blockchain with no reason simply it is faster, cheaper, and low fees.

Of course, multi-chain is one way to connect with other blockchains, but it still needs to have security without the chain to be hacked.

It is simply to risky to transfer from one chain to another.

Another factor is scalability.

It is too overrated. With the faster scalability, you are likely to die fast too.

There is no way to build a community with speed and hope people will stay there to root for you.

Photo by Mika Baumeister on Unsplash

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