Russia's CryptoRuble - Nothing to be excited about.

cryptonik (55) in cryptocurrency • 7 years ago (edited)

In this article I will voice my opinion on the crypto news coming from Russia and what I think it means.

That Cryptic Ruble

As most of you have heard by now, the Russian President Vladimir Putin has made it public that Russia will issue it's own cryptocurrency called the "CryptoRuble".

The news broke through the Minister of Communications Nikolay Nikiforov, who stated:

“I confidently declare that we run CryptoRuble for one simple reason: if we do not, then after 2 months our neighbors in the EurAsEC will.”

According to the Russian officials, the currency will be centralized: issued and maintained under the country's authority. Users will not be able to mine it. It will be possible to exchange crypto Rubles for the fiat version, however if one cannot explain where they came from, a 13% taxation will be applied.

So far, so ~~bad~~ good.

I have seen this news marketed as "Governments diving into Blockchain technology", "Russia first in the Crypto game", "Russia to become Major Crypto Player" and so on, which I find is profoundly exaggerated.

Let us remind ourselves of some of the core principles of Bitcoin:

Decentralization
Self-regulation
Free access

One of the major Bitcoin innovations is that a decentralized currency doesn't need regulatory oversight and involvement of authority. Decentralization provides free access to every one who wants to participate, without discriminating.

The "Proof of State" algorithm

As you see, the CryptoRuble goes against every single one of these core points and therefore I find the news very unimpressive.

The "CryptoRuble" is not a real cryptocurrency.

I don't like it and you shouldn't either. (Sorry, actually you are entitled to your own opinion)

Why would users want to participate in something that goes against all fundamental values of the Crypto community?

To give it some positive perspective - Yes, government's all over are looking into blockchain technology; There is no alternative really, as the amount of crypto investors grows, the technology becomes more significant. Introducing the CryptoRuble might help the adoption rate of real cryptocurrencies, as it could potentially be a link to Bitcoin and altcoins much like the Tether is. At the very least it could raise awareness.

Overall, I find this course of action a bit disappointing, seeing that recently the Russian President met with the founder of Ethereum Vitalik Buterin to discuss cryptocurrency and also had him speak at the Russian Economic Conference 2017.

I am certain, that the CryptoRuble is not something Vitalik would envision or endorse.

In the long term, I do see another far more promising gateway into the Crypto World for Russia, which I will discuss in a separate article.

Image sources:
image source 1
image source 2

Information ources:
https://www.coindesk.com/vladimir-putin-vitalik-buterin-discuss-ethereum-opportunities-recent-forum
https://cointelegraph.com/news/breaking-russia-issuing-cryptoruble
https://cointelegraph.com/news/suddenly-vladimir-putin-meets-vitalik-buterin-endorses-ethereum

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Do you want to find out what's new in the Ethereum Metropolis update? (Read article)

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- Nick ( @cryptonik ) -

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7 years ago by cryptonik (55)

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leonawicz (25) · 7 years ago

Great post, Nick. I like your point that the cryptoruble may do some good by bringing more mass awareness and eventually adoption of other cryptocurrencies. But yeah, I don't see the cryptoruble doing much for the cryptoruble itself. It misses the whole idea, like you say.

I mainly see these kind of hybrid crypto-fiat ideas as a way for countries to find themselves a cheaper way to manage and issue centralized currency, trading off some bit centralization in order to limit some degree of overhead/middlemen financial costs. But they sure don't want to let go of central control and the ability to manipulate the currency on their terms.

A hybrid is not necessarily a bad thing, but it's valuable to point out that it's not like bitcoin for example. But who knows, maybe hybrids will find a valuable niche between fiat and crypto in the future. Maybe governments will put favorable taxation rates on converting through their hybrid. Or maybe not.

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cryptonik (55) · 7 years ago (edited)

Thanks, Matt.

I think that in near future the disruptive potential of blockchain technology is going to force countries to either participate or loose out. Geopolitical competition. Rumors have it that China is working on a regulated Yen-bound crypto and when it's released they will issue new regulations for ICO's. This might actually be an overall good thing for everyone, and also I don't think that China will want to really miss out on all the innovation, especially if you consider that 80% Bitcoin is mined there.

A problem that these Countries (especially Afrika) are facing is investors, wanting to protect themselves from inflation, selling their fiat currency and storing value in cryptos. Obviously no government is happy about such economic blows.

The hybrids seem like an alternative offering to mitigate the damage. I hope thought, that the people will inform themselves and choose the real cryptos.

For banks and governments hybrids might be the only viable solution at the moment, because regulation is necessary for these bureaucrats. Most big banks already started working on their own crypto's. Ripple is in this niche too.

I think that projects focused on user experience might help the adoption rate too, App-wallets with nice GUIs like Coinami and crypto debit cards like TENX are a great start.

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cryptonik (55) · 7 years ago

@originalworks

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cryptonik (55) · 7 years ago

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cryptonik (55) · 7 years ago

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agrousselle (25) · 7 years ago

I think the point of the cryptoruble is not the currency itself, but rather as a means to an end. There are billions of dollars invested globally in cryptocurrencies and the Russian government has struggled to attract foreign investment due to sanctions and ongoing tensions with the west. By creating a cryptocurrency the state can regulate the FDI coming in from crypto investors while allowing them to freely exchange between between the ruble and cryptoruble to seek returns on investment. It offers much more accountability than investors saw in previous decades and Russia is poised to do well as an emerging market.

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That Cryptic Ruble

The "Proof of State" algorithm

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Russia's CryptoRuble - Nothing to be excited about.