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This is the second part of our blockchain 2.0 series. Blockchain can change the way individuals and institutions handle their finances. This article looks at how the existing currency system evolves and how the new blockchain system can bring changes to the next key step in currency evolution.
Two key ideas will lay the foundation for this article. When PayPal was launched, its operations were revolutionary. The company collects, processes, and confirms a large amount of consumer data to facilitate various online transactions, thereby effectively allowing platforms such as eBay to grow into a trusted source of business, and setting a benchmark for global digital payment systems. Second, although the more important key ideas need to be emphasized, it is an existential problem. We all use money or currency to meet our daily needs. A $10 bill allows you to buy a cup or two of coffee from your favorite coffee shop and start your day. In fact, we all depend on our respective national currencies.
Of course, since the barter system began to determine what your breakfast is, humans have spent a long time. But what exactly is currency? Who or what gives it value? As popular rumors say, can you get the true value represented by the currency "symbol" by going to the bank and giving them a dollar bill?
The answer to most questions does not exist. Even if the answer is given, it is incredibly vague and subjective at best. As early as the day civilization began to establish small towns, it was considered by the rulers to be a legitimate local currency, almost always composed of precious things in that society. It is believed that the Indians used dried pepper to trade, while the ancient Greeks and Romans traded in salt. Gradually, most of these prehistoric enlightenment civilizations used precious metals and stones as tokens for trading. Gold coins, silver jewellery and rubies began to have the same name as "value." With the Industrial Revolution, people began to print these transaction vouchers, and we finally seemed to see a call for demand for paper money. Paper money is reliable and cheap. As long as the country provides guarantees for the paper money held by its users, the "value" represented by the paper money can be backed by gold or hard currency of the same value when needed, and people are happy to use them. However, if you still believe that the banknotes you hold now have the same guarantee, then you are wrong. We are currently living in an era when almost all major currencies are in global circulation, and economists call it legal tender. Pieces of paper that lack value can only get guaranteed support from the country where you live. The exact nature of fiat currencies and why they may be a flawed system belongs to the economic field, and we will not cover it at this time.
In fact, the only point in all this history that is relevant to this article is that civilizations began to use tokens that imply or represent the trade value of goods and services, rather than unreal barter systems. Tokens, of course, are also the key concepts behind cryptocurrencies. They have no inherent value. Their value depends on the number of people adopting the particular platform, the trust of the adopters in the system, and of course the background of the regulatory entity itself (if there is a regulatory entity). The high price and market capitalization of Bitcoin (BTC) are no coincidence. They are the first cryptocurrency in the industry and have many early adopters. The ultimate truth behind cryptocurrency makes it so important and so incomprehensible complexity. This is the next step in the natural evolution of "money". Some people understand this, and some people still believe that the "real" currency in a solid currency concept is always backed by some kind of intrinsic value. Although there have been countless debates and studies on this dilemma, they still haven't focused on the future of blockchain.
For example, Ecuador made headlines in 2015 because it claimed that it plans to develop and release its own national cryptocurrency. Although the official attempt is to aid and support their existing monetary system. Since then, other countries and their regulatory agencies have drafted or are drafting documents to control the "epidemic" of cryptocurrencies, and some of them have issued frameworks to create a roadmap for blockchain and cryptocurrency development. Germany is believed to be investing in blockchain projects in the long term to simplify its taxation and financial systems. Banks in developing countries are joining a system called the bank chain to cooperate in the creation of private blockchains to increase their efficiency and optimize their operations.
Now, when we put the two ends of the story together, remember the first mention of PayPal before the casual history class? Experts compared the adoption rate of Bitcoin (BTC) with that of PayPal. Consumers initially hesitated, and only a few early adopters were ready to use the above products, but then more widespread adoption gradually became the benchmark for similar platforms. Bitcoin (BTC) has become the benchmark for similar cryptocurrency platforms, while the main coins include Ethereum (ETH) and Ripple (XRP). Adoption is steadily increasing, legal and regulatory frameworks are being developed to support it, and active research and development are in progress. Unlike PayPal, experts believe that the use of blockchain technology to provide cryptocurrency and platforms for its digital infrastructure will soon become a standard specification rather than an exception.
Although the increase in cryptocurrency prices in 2018 can be called an economic bubble, companies and governments continue to invest in the development of their own blockchain platforms and financial tokens. In order to resist and prevent such incidents in the future, while continuing to invest in this field at the same time, stablecoins that replace traditional cryptocurrencies have been successfully developed.
The financial giant JP Morgan Chase launched their own blockchain solution for enterprises, called Quorum, to process stablecoins called JPM coins. Each such JPM coin is pegged to $1, and its value is guaranteed by the parent company under the supporting legal framework. Platforms like this make it easier for large financial transactions to transfer millions or billions of dollars in an instant over the Internet, without having to rely on traditional banking systems like SWIFT, which have lengthy processes and are themselves decades of history.
In order to make the subtleties of the blockchain available to everyone, the Ethereum platform allows third parties to use their blockchain or derive tokens from it to create and manage their own blockchain-protocol-token ternary Group’s propositions, thereby promoting wider standard adoption and paying less basic workload.
Blockchain allows digital versions of existing financial instruments to be quickly created, recorded, and traded over the network without the need for third-party monitoring. The inherent security and security features of the system make the entire process completely safe and free from fraud and tampering. This is basically the only reason that existing financial instruments require third-party monitoring. Another area that governments and regulators deal with in financial services and tools is transparency and auditing. Through the blockchain, banks and other financial institutions will be able to maintain all transaction records that are completely transparent, hierarchical, almost permanently preserved and tamper-proof, making audit tasks almost useless. By using the blockchain, the development and changes that the current financial system and service industry urgently need can be made possible. Distributed, tamper-proof, near-permanent storage, and fast-executing platforms are very valuable to bankers and government regulators, and their investment in this area seems very useful.
