"Bitcoin VS Cash" Who is the "real currency"?

What are the main characteristics of currency?

First, let's take a look at what currency is and its core characteristics.

Currency refers to any form of money and is circulated as a medium of exchange for goods and services. Simply put, it is an asset that citizens of a country can use to settle daily payments.

The main characteristics of currency include:

Durable: A currency must be durable. This way people can reuse it many times in the future without significantly degrading its quality.

Dividable: A currency must be divisible so that people can easily use it for ordinary transactions. For example, a 20-dollar bill can easily be exchanged for two 10-dollar or four 5-dollar bills.

Portability: No matter how valuable an asset is, only when the holder can easily transfer it from one place to another can it play the role of currency (whether physical or electronic transfer).

Recognizable: In order to use it as a transaction medium, the authenticity and quality of the currency must be easily identifiable by all parties involved in the transaction. If the asset lacks this feature, a third party must be hired to evaluate the value of the tool, which greatly increases the transfer cost.

Scarcity: In order to maintain its value, the circulating supply of currency must be restricted. Although the central bank can still print new banknotes, in order to prevent a large loss of currency value and hyperinflation, the entire process of printing currency is subject to strict supervision.

Unity: In order to achieve the purpose of swap, currency units must be relatively uniform in value and quality. For example, gold is used to make a one-dollar coin and copper is used to make a 50-cent coin, otherwise the dependence and consistency of future transactions will be destroyed.

Universal acceptance: For an asset to function as a currency, it must be universally accepted by individuals and businesses. For example, no matter how valuable a diamond is, it cannot be used as a currency, because most people will not use it as a payment method.

Stability: A currency must have a relatively stable or gradually increasing value, so all parties involved in the transaction know how much money they charge or pay for the goods or services, without the need for additional evaluation and transaction costs.

Difficult to counterfeit: Currency must have certain qualities that make it difficult for people to counterfeit. If it is easy to forge, numerous fake assets will enter the market, reduce the value of the assets, and greatly increase transaction costs due to third-party quality assessments.

Does Bitcoin have the characteristics of currency?

To evaluate whether Bitcoin can be used as currency, let's first look at how the core characteristics of currency are reflected in digital assets.

Durability: Bitcoin "lives" electronically on the blockchain, so before its network runs, it is still durable without worrying about quality degradation.

Dividable: Bitcoin is highly divisible, and its smallest unit is 0.00000001 BTC or 1 satoshi (1 BTC is equal to 100 million satoshis).

Portability: The user only needs a compatible device (smartphone, laptop or tablet), a currency wallet and internet connection to access and move the bitcoins he holds, making it easy to transfer bitcoins.

Recognizable: Bitcoin transactions are recorded on the blockchain, and anyone can identify and verify the authenticity of Bitcoin.

Scarcity: The upper limit of Bitcoin's supply at the protocol level is 21 million. The number of newly issued Bitcoins is limited and gradually decreases over time. This is a deflation mechanism called "Bitcoin halving". Since no one can increase new Bitcoin production, Bitcoin has better scarcity characteristics than gold or other precious metals.

Unity: Every Bitcoin is equal, and all units have the same quality.

Universally acceptable: Unlike currency, Bitcoin is not a universally accepted method of payment. However, due to its growing popularity, digital assets are being adopted as a payment method in more and more places around the world.

Stability: Bitcoin is definitely not a stable asset, because the currency often fluctuates in extreme prices. However, since the launch of digital assets, volatility has gradually decreased. In the long run, the entry of institutional investors can improve its stability.

It is difficult to counterfeit: Due to the characteristics of Bitcoin's blockchain, it is still impossible to counterfeit Bitcoin on the market. Although there is a small probability that a way to counterfeit new coins can be found at a certain point in time, it will not happen in the short term.

Based on the above, we can conclude that, in addition to stability and general acceptability, Bitcoin has all the characteristics of a currency.

Interestingly, with the increasing adoption rate of Bitcoin and the maturity of cryptocurrency as an asset class, both will have opportunities to improve in the future.

What happens after all bitcoins are mined?

 As the originator of cryptocurrency, the total amount of Bitcoin is capped at 21 million.

As of now, the number of bitcoins dug up in the world has reached 83% of the total, and it is estimated that by 2040, more than 99% of bitcoins will be dug up. The question is, what will happen when all bitcoins are mined?

As we all know, "digital gold" Bitcoin is a deflationary virtual currency. Subject to the 21 million fixed circulation set by the creator Satoshi Nakamoto, Bitcoin is destined to not be able to print and issue unlimited banknotes like US dollars and British pounds.

As the saying goes: Things are precious. The scarcity of Bitcoin can promote its ever-increasing value. But at the same time, when all the bitcoins are mined, the miners who maintain the bitcoin network will no longer be able to get block rewards, which also raises a series of questions:

1. What happens after all bitcoins are mined?

2. After reaching the supply cap of 21 million, what will the miners do?

3. How will miners make a living in the future?

4. What incentives are there to allow miners to continue to maintain Bitcoin network security?

In fact, the answer is very simple. It can be said that the life of miners lies in transaction fees.

What happens after Bitcoin is mined?

Whenever a new block is mined, miners will receive certain rewards, including block rewards for newly mined bitcoins and transaction fee rewards. These two big rewards can motivate miners to do the right thing and protect the Bitcoin network.

Once all the bitcoins are mined, miners will no longer be able to get block rewards, and their source of income is only transaction fees. Will they make ends meet? If the number of miners is drastically reduced due to a sharp drop in income levels, will this eventually lead to the collapse of the Bitcoin network?

The answer is negative.

As shown in the figure below, the research of crypto asset management platform Interchange and cryptocurrency analyst Awe & Wonder found that Bitcoin transaction fees are rising. By 2030, Bitcoin transaction fees will exceed block rewards. Once transaction fees account for more than 50% of the rewards miners receive, then miners can transition to the mode of making money from transaction fees.

Picture originated from:@Awe_andWonder Twitter

Although no one dared to pack tickets, there is sufficient evidence that transaction fees are sufficient to maintain the livelihood of miners and maintain the stability of the Bitcoin network.

After all, as the value of Bitcoin continues to increase, so too will the transaction fees that miners receive. However, some people have also raised questions about whether the high transaction fees will make users stay away from Bitcoin?

In fact, bitcoin transaction fees are much lower than the handling fees incurred by bank transfers and house purchases. Interchange pointed out that

"The real estate transaction fee is 2% of the average transaction price or $8,000 per transaction. I believe that in the future, people will be more willing to spend $50 to pay for transactions through encrypted assets. After all, encrypted assets will not be easily lost, damaged or stolen. Real estate faces certain risks in times of turmoil."

In the future, transaction fees will account for an increasing proportion of miners' income sources, and as the price of BTC gradually rises, transaction fees will also increase. In view of this, it is economically feasible to use transaction fees to incentivize miners to continue to maintain the stability of the Bitcoin network.

For Bitcoin miners, their source of income will not change from relying on block rewards to relying on transaction fees overnight. The future is full of variables, but there is undoubtedly enough time for miners to adapt to the new model to jointly maintain Bitcoin network security.

What are the cryptocurrencies with the highest trading volume?

 

The cryptocurrency market is very diverse. Due to the low threshold, almost anyone who understands blockchain technology can develop their own cryptocurrency. Currently, there are more than 1,600 cryptocurrencies listed on major, medium-sized and specialized exchanges.

Among these cryptocurrencies and digital tokens, objectively speaking, the real cryptocurrency does not exceed double digits. And this small part can continue to be reduced to cryptocurrencies with sufficient trading volume and real circulation, or utility tokens that are often used to pay for the use of blockchain platforms. This category probably includes 20-30 different digital currencies.

Since the advent of cryptocurrencies, the two most popular cryptocurrencies have been Bitcoin and Ethereum (Ether). In the past few years, Ripple XRP has been ranked third. In September 2018, the market value of Ripple XRP even surpassed Ethereum briefly, becoming the second most popular cryptocurrency.

In addition to Bitcoin, Ethereum, and Ripple XRP, there are several other popular cryptocurrencies, but their market capitalization and popularity are sometimes strong and sometimes weak. The Crypto 10 Index created exclusively by us is composed of the most popular cryptocurrencies in any given time period, and can also be traded.

Which cryptocurrencies are most popular with traders?

Through a quick online search, the most popular cryptocurrencies currently on the market include:

1. Bitcoin
2. Ethereum
3. Ripple XRP
4. Litecoin
5. NEO
6. IOTA

Bitcoin

Bitcoin is considered the earliest cryptocurrency, launched in 2009, and the cryptocurrency movement began. Bitcoin and its underlying blockchain technology were invented by Satoshi Nakamoto or his group. Bitcoin is seen as an alternative to the legal tender system. The true identity of Satoshi Nakamoto is still unknown.

Satoshi Nakamoto pointed out in the Bitcoin white paper that the legal tender system controlled by the central bank and a small number of financial institutions has led to the concentration of wealth and power and hindered the circulation of society and wealth. Inflation erodes the savings of ordinary people, and this is mostly the result of the central bank's printing of money.

Bitcoin solved this problem by limiting the number of issuing units to avoid inflation caused by money printing. Bitcoin's peer-to-peer blockchain technology means that it does not require financial institutions to process transactions and verify ownership.

So far, Bitcoin is still the most popular cryptocurrency, and its price movements have a significant impact on the crypto market.

Ethereum (Ether)

Ethereum is the second most popular cryptocurrency, and there is a big difference between it and Bitcoin. Ethereum (Ethereum) is actually the name of the blockchain platform, while Ether is the name of the cryptocurrency. Ethereum is a blockchain platform that runs smart contracts.

Smart contracts can be seen as a set of predefined "rules" for creating different applications or Dapps (decentralized applications). The Dapps created by Ethereum range from games to ICOs (ICOs in cryptocurrencies are similar to crowdfunding or IPOs).

Since Ethereum, although other smart contract platforms have been launched one after another, each platform claims to have more advanced blockchain technology, but Ethereum as the earliest blockchain platform still maintains the highest usage rate.

Compared with Bitcoin being used as a substitute for traditional legal tender, Ethereum (except as a transaction asset) is used to pay for the use of the Ethereum platform, so it is also called a "utility" cryptocurrency.

Ripple XRP

Ripple XRP is another "utility" coin, and its blockchain platform aims to more effectively facilitate the cross-border transfer of legal tender. Ripple XRP has been cooperating with and supported by many banks from the beginning, and is often regarded as an "authoritative" cryptocurrency.

In recent years, the number of transfer services using the Ripple platform has gradually increased, making it possible to become part of the traditional financial system.

Litecoin

Litecoin is another cryptocurrency that has the potential to replace fiat currencies and is Bitcoin's main competitor. Its creators hope that Litecoin will eventually be used to pay for daily goods and services. Litecoin positions itself as a more practical and technologically advanced alternative to Bitcoin, and its confirmation of transactions through P2P networks is significantly faster than Bitcoin.

In principle, this advantage may make Litecoin more attractive to merchants, but as cryptocurrency transactions in "real life" are still greatly restricted, Bitcoin's more mature "brand" makes it the preferred legal currency alternatives.

NEO

Like Ethereum, NEO is a smart contract and Dapps platform. NEO was launched in 2014 with the goal of providing a practical, but technologically more advanced blockchain technology based on Ethereum.

Many people believe that the NEO platform is technically superior to Ethereum, but as in the case of Litecoin and Bitcoin, the latter’s stronger market position allows it to maintain a higher market share.

IOTA

IOTA is a unique cryptocurrency based on a Directed Acyclic Graph (DAG) structure, specifically designed for Internet of Things (IoT) devices. The Internet of Things can facilitate microtransactions of connected devices and help maintain data integrity. Recently, with the popularization of Internet of Things technology, IOTA has leapt into the ranks of the cryptocurrency with the largest transaction volume, and its development prospects are broad.

What is the blockchain?

 Simply put, blockchain is a new way of accounting.

In the 15th century, humans began to use the "double-entry bookkeeping method" to keep accounts, so that the numbers in the bank can be trusted by people all over the world, giving birth to global trade and modern capitalism. Everyone's transaction records are stored in intermediaries such as banks, which is a centralized system.

Bitcoin uses encryption technology to skip the intermediary bank with a distributed ledger, allowing all participants' computers to record and confirm together, making it a decentralized transaction system.

Ethereum adds the function of smart contract on the basis of Bitcoin.

Smart contracts are written in programs. According to the contract, they can also be used with financial transactions, so many people use it to issue their own tokens. Smart contracts can also be used to record equity, asset ownership, medical records, certificates, etc., making the development of blockchain have unlimited possibilities.

Let's take a look at how the blockchain has evolved:

Before the blockchain: a centralized world

All transactions must be matched by an intermediary institution and exchange in the center. These centers keep all transaction records so that the global economy and financial system can operate.

For example, 

if A wants to transfer money to B, a bank must be used as an intermediary; for transfers between banks, an intermediary institution (such as a financial company in Taiwan) must be used. Users are required to bear the handling fee, and relevant records are also kept in the transaction center.

Blockchain 1.0: Bitcoin-the beginning of decentralization

Bitcoin has created a new method of bookkeeping. It uses a "distributed ledger"  to skip the intermediary bank and allow all participants' computers to keep accounts together to achieve a decentralized transaction system.

There are two kinds of people on this trading system, one is a pure trader, and the other is a miner who provides computer hardware computing power. The account book of the trader needs to be encrypted by the miner after calculation, and then uploaded to the chain after confirmation by all people on the blockchain. Theoretically, it is not tamperable, traceable, and encrypted.

The behavior of the miner to calculate encryption is called Hash, because for helping with the calculation, the miner can get a certain amount of Bitcoin as a reward. The transaction ledger is scattered in everyone's hands and does not require central storage or authentication, so it is called "decentralization."

No matter whether it is person-to-person or bank-to-bank, each other can transfer money to each other, and there is no need to go through an intermediary, which can save handling fees; the transaction account is encrypted and stored separately, which is safer than ever and transaction records are more difficult to be tampered with.

Blockchain 2.0: Ethereum──Smart Contract Certification

Compared with Bitcoin, Ethereum is the underlying technology of blockchain with more "smart contracts".

A smart contract is a contract written in a program that will not be tampered with, will be executed automatically, and can be used with financial transactions. Therefore, many blockchain companies use it to issue their own tokens.

Smart contracts can be used to record equity, copyright, and intellectual property rights transactions, and some people use it to record medical and certificate information. Therefore, in addition to virtual currencies such as Bitcoin, the unlimited possibilities of blockchain applications are opened.

For example, in the application of the food industry, all data will be written into the blockchain database from raw material production, processing, packaging, distribution to shelves. Consumers can obtain the most complete food production history by scanning the packaging barcode;

In the future, singers can release their albums on a music platform built on the blockchain without going through a record company, and automate music authorization and profit sharing through smart contracts; listeners can directly pay the creative team for each song they listen to. No need to go through online music intermediary platforms such as Spotify.