Alpari analyst Veselin Petkov in his newspaper column “RBC” Krypto tells the story of the emergence of bitcoin and explains how the government can begin to manage the uncontrolled system
Decentralization is one of the main qualities of cryptocurrency, but the large country can begin to control this kind of assets Alpari analyst Veselin Petkov explains how this is possible.
In recent years, increasingly began to appear the news that some States are considering the launch of a national cryptocurrency. Of course, in any country there is always an official who will advocate for this know-how.
Implemented examples already exist: the national cryptocurrency in Venezuela — El Petro (PTR). I believe that this topic will only become more relevant, and so the question arises: are there any prospects for such national currencies? To answer, first you need to recall the history of the emergence of bitcoin and the history of the revival of interest in him, it is necessary to explain why almost 10 years ago for money to notice.
There would be no happiness, Yes the misfortune has helped
In 2008, the global economy went into recession, started the global financial crisis, which was the biggest since the second world war. Central banks around the world have begun to reduce the key interest rate to try to unfreeze the financial flows. For example, the Federal reserve lowered its key interest rate from 5.25% in late 2007 to 0.25% in late 2008. But despite this, the crisis has not ended. Central banks around the world (US, Eurozone, UK, Japan, etc.) lowered key interest rates to almost zero, that is, they have no additional leverage on the economy. Regulators for the first time faced with such a crisis and didn’t know how to deal with it.
However, in late 2008, the fed launched the asset purchase program, which resembled tried in Japan in the early 2000’s, the program of quantitative easing (QE) to combat deflation. Many economists believe these programs are the usual run of the printing press: the fed started to print dollars and inject them into the economy, providing one way or another in the liquidity of major U.S. banks, pension funds, manufacturers, so that they do not bankrupt during the crisis. Like monetary policy, the fed has been harshly criticized.
First, there was a growing concern that running the printing press will lead to devaluation of savings, and secondly, the fed started to save the big banks and financial intermediaries is to help ordinary people to pay their mortgages — in the US, while many lost their homes. However, the protests of people are unable to change the decisions of regulators. So in late 2008-early 2009 in the world there was a lot of distrust of Central banks concentrated too much financial power. It was at this point there was bitcoin. It was promulgated almost simultaneously with the start of the printing machines in USA, UK and other countries.
What cryptocurrency loved by millions?
In the first block of bitcoin was written the following: The Times, 3 January 2009 Chancellor on brink of second bailout for banks. It is believed that the message the Creator of the cryptocurrency Satoshi Nakamoto criticized irresponsible in his understanding of the policy of the Central banks and explained the idea of creating a digital currency — limited emission. Bitcoin does, for example, she is only 21 million.
Bitcoin cannot be printed infinitely, which is the exact opposite of the actions of the world’s monetary authorities. The limited supply has become a very important factor to attract users in the first years of the existence of cryptocurrencies (2009-2012) and still remains one of its key advantages over Fiat money.
Transparency and independence
There are other significant differences cryptocurrency from Fiat currency, which influenced the growth of interest in bitcoin in the first years of his life. First, it is open source and blockchain. In other words, is the transparency of bitcoin, and the fact that he does not belong to anyone and is not under anyone’s sole control. Anyone can see bitcoin’s mathematical algorithm, as well as the number of assets in circulation which addresses they “lie” and which transactions have been committed. Central banks in this respect are great to lose.
The same, the fed does not know the amount of printed dollars constituting the monetary aggregate M3. The current financial system is so complex that the fed has lost control over the total number of printed banknotes. In addition, during the global financial crisis, people have criticized the U.S. regulator in opacity, it is not clear where to leave the money printed by the fed makes a “his” and the money does not come to ordinary people. Blockchain solves this problem, since it is transparent and impartial.
The truth is obvious and genuine
Due to the Distributed Ledger Technology (DLT) or a distributed registry transactions in bitcoin cannot be reversed. To do this you would have to redo the block chain blockchain, which is stored on the computers of a huge number of users. The current banking system loses on this point. In fact, everything is stored in one place. Hack the Bank’s register is much easier and cheaper than to hack the bitcoin blockchain, and there is a possibility that breaking of the traditional financial system, will become visible immediately.
Access to your money
When making bitcoin transactions there is no financial intermediary. The owner of the cryptocurrency always has access to their funds and may do with them what he wants, regardless of financial intermediaries. During the global financial crisis there were many injured in failed Finance companies that were in queue to withdraw their money, but did not have time to do that. Are unable, as many simply had direct access to their money. In addition, this also can be attributed to the lack of censorship from bitcoin. Holder decides who and when to send the crypto-currency unlike the current banking system. Banks may refuse your client to commit to a specific transaction.
Who does not work shall not eat
Bitcoin is created by algorithm Proof-of-Work. That is, the miners must perform laborious work to get the reward of cryptocurrency. Apply here key saying “who does not work shall not eat.” In the current banking sector, if we take for example the U.S. Federal reserve, hundred dollar bill, conventionally, printed for pennies. The Central Bank collects this seigniorage, and many that are very excited. That is why some of them joined the bitcoin ecosystem.
Due to all these advantages which distinguish cryptocurrency from Fiat currency, bitcoin has been able to attract many users during the global financial crisis. Over time he received more bonuses: it has become global and highly liquid financial instrument that can be used as a means of payment and still pay low transaction fees.
The paradox of national cryptocurrencies
Now let’s see what a national cryptocurrency. Suppose that in a certain country programmers to develop itself and if it has all features mentioned above (discovery of software code, the blockchain that is independent of the hashing algorithm, a distributed registry, the inability to reverse transactions, the lack of censorship of transactions, etc.), then this is a classic cryptocurrency. That is, it will be called national theoretically, due to the fact that it was developed by programmers who are residents of a particular country.
Cryptocurrency can be designed in such a way that it will be under the control of, for example, through state-owned miners that confirm transactions and validinput them. For example, you can develop a cryptocurrency with an algorithm Proof-of-Stake and a limited number of hub nodes (Nodes), which will deal with MINICOM. All these nodes are to be under state control. Also the cryptocurrency can be developed in such a way that she never had DLT (distributed registry). In other words, a database with all the transactions will be kept in the state organizations.
When it comes to national cryptocurrency, in most cases, means a digital financial instrument that in one way or another will be under the control of the state. Such financial instruments cryptocurrency activists called the national digital asset, and not a cryptocurrency because they do not meet key characteristics, in particular the properties of bitcoin that we have discussed previously.
Who needs a national cryptocurrency?
In my opinion, crypto anarchists or libertarians, not exactly interested in national digital currency. They joined the movement in the first years of the global financial crisis to confront Central banks, centralization, and go to the money, which are not under the control of the state. Also there will be no interest in the national digital currencies and the followers of these crypto-anarchists that joined in the idea to move to digital money later to get their finances were not under the control of the state or a centralised financial institution.
In the last 2-3 years on the back of strong growth rates for digital money, the very word “cryptocurrency” and all have the prefix “crypto” has become very popular. There are so many people who do not understand very well what cryptocurrency is willing to buy it, but I’m afraid that they cheated. So, if the state somehow become a guarantor of a digital asset, that many of the people will surely be interested in them will start to buy it, invest in it and use it. Moreover, I think that if the state will launch its own national digital currency and call them, for example, cryptodira, CryptoPro or scriptural, etc., then it may be beneficial to the real cryptocurrency in terms of the image.
The eventual launch of the national cryptocurrencies can play a very important and positive role in the global economy. At the moment, at the initiative of the administration of U.S. President Donald trump are actively trade wars that in turn crushes the global economy by creating artificial barriers between countries. These barriers is only possible in the current banking system — the government can always block or stop Bank transactions. Cryptocurrency can solve this problem. If the state will launch its own national digital currency and will be able to create a platform for its exchange, it will be an effective mechanism to bypass any kind of sanctions. The development of this idea will halt or even reverse the current trend to fragmentation of the global economy and re-start of global integration.