With More Cryptocurrencies, Will Digital Currency Collapse in the Future?

In fact, this is a good question, and the main one that most people are afraid to trust in Bitcoin.
Many people believe that the reason Bitcoin is valuable is because it is “rare,” and if Bitcoin is no longer “rare,” then it has no value. Actually, this is a misunderstanding.

What is all “currency” in essence? The answer is trust. The biggest reason for the dollar’s value is because of the credibility established for the dollar under the Bretton Woods system, not the so-called equivalent exchange with gold. The main reason why the RMB is valuable is because of the trust system of it in China and neighboring countries, not the exchange of dollar reserves.

This could explain the large devaluation of some countries’ currencies (such as Russia’s ruble), because the government and the current world situation have led to a trust system that does not support the existence of such a currency. The so-called economic sanctions and currency speculation are superficial and superficial reasons.
The essence of money is trust. So, what about Bitcoin?

Bitcoin is a currency without a centralized trust measurement agency. The value of Bitcoin, that is, its “credit system”, comes from distrust of centralized units.

At present, the trust between countries is getting worse and worse, and even the people of various countries themselves do not trust the currency of the country. And trust, like quality, is conserved. Trust in centralized currency decreases, and trust in decentralized currency naturally increases. This is the essence of the continuous increase in the value of Bitcoin.

Therefore, for digital currencies such as Bitcoin, there are only two endings. Either countries want to understand that they will no longer issue over-issued currencies, and issue additional currencies in a scientific and reasonable way. Countries have a unified and stable exchange rate and maintain the credit system of centralized currencies. Then, The value of a currency such as Bitcoin will be infinitely close to 0. Either countries continue to use the method of over-issued currency to collect seigniorage from everyone, then the trust in the centralized currency will become lower and lower, and the total value of the decentralized currency such as Bitcoin will be infinitely close. For all units that do not trust the government, and other governments, but need to conduct international trade, the gross product of labor. Either the price is crazy high, or it’s worthless.

Now that you understand this, you can answer this question. Since another currency can be created, if there is more currency, isn’t it also equivalent to additional issuance of digital currency? And at this time, it is equivalent to not needing the state to collect seigniorage,

When a new cryptocurrency is issued, speculators will participate, but the market will not. The reason is very simple. The new cryptocurrency has not been recognized by the market, the application has not been generated, and there is no way for this currency to be exchanged for means of production. Then this currency is not currency, but a virtual commodity for speculation. That is to say, even if someone ICOs an SBC(strike bit club), no one will choose this coin except for those speculators.

Then another problem arises. If the founder has set up SBC use counters all over the world, and using SBC can buy a certain commodity cheaper than the market price, then it will not create a market for SBC, but let this Has the currency produced circulation? The answer is, yes.

But this requires him to have the ability to monopolize a just-needed product, otherwise even if he pays a very high cost, the digital currency will still not be able to hit the market. Because if other merchants cut their prices, the newly created SBC will lose its competitive advantage. In the end, either monopolize a certain market for rigid demand, and other merchants cannot reduce prices, or slowly cannot afford the cost of this price reduction. Eventually SBC will become something like a collectible, slowly losing its liquidity. Or become a tool for speculators’ pyramid schemes, or just disappear and no one cares.

Then, if you understand the second point, you will know that if you don’t have the ability to monopolize an entire market, you will definitely not choose to implement such a digital currency. In real life, countries have also discovered this problem. Distrust between countries and people’s distrust of the government will inevitably lead to an increase in the circulation of digital currency. Therefore, many governments choose to support a digital currency. . For example, Japan supports Bitcoin, Russia supports Ethereum, and nothing more.

To seize the liquidity of digital currency that is beneficial to oneself is to seize the seigniorage of the next era. The common phenomena of the market economy, inflation and deflation, will still occur in digital currencies. It’s just a little different from what you imagined.

close

We don’t spam! Read our privacy policy for more info.

Related Articles
How to Use Secret

How to Use Secret

Secret Network: What Is It? A blockchain network called Secret Network allows for encrypted

What Is Optimism

What Is Optimism

Explain optimism. Optimism functions as a layer 2 chain on top of the Ethereum

International News: U.S. Q4 economic growth forecast from 4.3% to 2.8% – Dec. 2nd, 2022

12/02/2022

1. The Atlanta Fed GDPNow model: lowered the U.S. Q4 economic growth...

Singapore Chips Away at Hong Kong’s Hedge Fund Dominance

12/01/2022

Singapore Chips Away at Hong Kong’s Hedge Fund Dominance Singapore Chips Away...

FTX Implosion Prompts Call by DOJ Arm for Independent Probe

12/01/2022

FTX Implosion Prompts Call by DOJ Arm for Independent Probe (Bloomberg) —...

Australian Central Bank Has Traders Primed for New Rate Surprise

12/01/2022

Australian Central Bank Has Traders Primed for New Rate Surprise Australian Central...

Wall Street Turns Bearish on Stocks After Bad Year

12/01/2022

Wall Street Turns Bearish on Stocks After Bad Year Wall Street Turns...

Apple Renames Mixed-Reality Software ‘xrOS’ in Sign Headset Is Approaching

12/01/2022

Apple Renames Mixed-Reality Software ‘xrOS’ in Sign Headset Is Approaching In this...