Why the world needs cryptocurrencies. Summarizing

Anyone who listens to the so-called blockchain experts, and follows the sometimes cult enthusiasm in the industry, quickly creates the impression that something grandiose is emerging here. “Distributed registry technology is changing everything!”, “Blockchain is becoming as important a technology as the Internet!” – two common and equally dubious statements. However, they keep popping up.

A few years ago, Bitcoin was still ridiculed, so it’s amazing how the rhetoric regarding Bitcoin and the completely unknown blockchain technology has fundamentally changed, and what they have achieved:

• Major media houses regularly report on cryptocurrencies.
• The industry attracts a lot of talent from the technology sector.
• Countless startups have sprung up.

Some companies have become stars in a very short time. The Binance crypto exchange now brings the same profit as NASDAQ, although it runs like a naughty cat from regulators around the world. Coinbase is the billion-dollar darling of Silicon Valley in terms of profit.

It seems that no company in the financial sector will be able to avoid the solution of success. And this is what the media write:

• The EU Commission states that cryptocurrencies are “not going anywhere.”
• Governments Start Interacting with Bitcoin & Co
• It seems that this young technology is about to develop like the Internet in the 90s.

But there is also the fact that the blockchain products and services currently on the market are practically not used, except for investments and speculation.

Utopia at its best

Whole books have been written about the potential impact of the level of trust on the Internet without intermediaries – the concept underlying the blockchain.

What could happen in the best outcome of events? The following key assumptions provide food for thought. Of course, some of them are very ambitious, and may take decades (if at all). But we will proceed from the fact that everything is still possible in this world.

And so, cryptocurrencies are taking power over monetary policy, snatching it out of the hands of the world’s central banks and governments. Governments have to buy cryptocurrencies themselves, just as they currently buy gold and foreign exchange reserves. Bitcoin or another cryptocurrency replaces the dollar as a global reserve currency.

Blockchains and the protocols used are turning into a kind of basic technology for transactions over the Internet. Just as TCP/IP regulates the exchange of data on the Internet, new protocols define the exchange of values. End users don’t even notice it.

“Hypertokenization” is coming: everything that has value, be it ideas, patents, art objects, possible harvests, debts, company shares or land, in short, absolutely everything from the real world, can be represented in the form of digital tokens. Thus, they are divided and can be sold. Liquidity pools ensure that tokens can be exchanged for any other token.

Smart contracts simplify the transfer of ownership from person to person without intermediaries.

Distributed registries and blockchains are ubiquitous, but still remain in the background. They monitor many processes of everyday life and thereby make the world more transparent. For example, the value chain of organic coffee can be checked at the supermarket checkout, and odometer readings and maintenance history can be checked when buying a car.

Autonomous organizations based on smart contracts are emerging. When any financial transactions can be automated, computer programs can generate income and reinvest it without human intervention.

In short, not life – but raspberries!

An optimistic view

The minimal success of Bitcoin compared to the previous forecast. One can even expect a steadily increasing increase in value against the dollar, or another currency. Cryptocurrencies are becoming a serious asset class that should be part of any self-respecting good portfolio, at least in small quantities.

As with all startups, it’s only natural that up to 90 percent of all current blockchain and cryptocurrency efforts will fail. The remaining 5-10%, however, bring so much added value to the world that the blockchain concept is slowly but surely being implemented. Just as the Internet has become faster, more convenient and more ubiquitous, distributed registries are increasingly finding their use in everyday life, but slowly, gradually.

More and more decentralized solutions complement applications and services because the previous intermediaries earn too much and lose the trust of users.

With the increasing success of these platforms, the demand for the tokens needed for them increases. Whether it is the implementation of smart contract programs, ensuring the security of platforms through staking, or participating in the life of platforms using security tokens.

Cryptocurrencies have become an integral part of society. Accordingly, the total value of all cryptocurrencies is high.

Pessimistic view

The pessimistic development of events is characterized by the prevailing opinion that “better money” is the only reasonable use of blockchains. However, we are not talking about any blockchain, but only about the supposedly safest, most invulnerable and censorship-resistant Bitcoin blockchain.

Even in this future, neither complex smart contracts, nor decentralized applications, nor other projects based on blockchains as a data structure will play a significant role.

Thus, the cost of all alternative cryptocurrencies is approaching zero. Only one can exist as a possible alternative to fiat money issued by governments due to the history of the network effect.

Thus, Bitcoin as digital gold is preserved. But, like gold itself, it is just one asset class among many, which, like its real counterpart, is available only to the powerful.

Blockchain, as a technological buzzword, no longer exists. He is dissolving among technologies.

Worst case scenario

Bitcoin’s biggest advantage at the moment is the financial sovereignty it has achieved. However, demand will inevitably fall unless two things happen.

• First, the value should be maintained at least for a longer period of time.
• Secondly, there should be other uses besides those mentioned above. Without these aspects, the price would have continued to fall and Bitcoin would have fallen into a downward spiral.

Although it is unlikely that this will mean the end of Bitcoin. Because someone is always willing to pay a price greater than zero. But it should be enough for users to lose enough trust.

The reasons for the loss of long-term stability of values may be, for example, an error or hacking at the protocol level. Government bans can also undermine trust, and force Bitcoin to occupy a low-level niche.

Smart contracts turn out to be impractical. Due to the issues mentioned above, no blockchain platform can host applications for the general public. In this case, cryptocurrencies will also not survive beyond marginal existence.

All other ways of using “distributed registries” turn out to be too inefficient compared to distributed databases. They have too few advantages to be used.

In this worst case scenario, Bitcoin and cryptocurrencies will simply end up in Internet history as “Second Life” or “Pokemon Go”.

A terrible scenario

Bitcoin overcomes one maximum after another, and cryptocurrencies all follow it en masse, attracting billions of investments. Institutional investors and companies sell off their gold reserves, and use all their funds to buy military-technical equipment. Blockchain technology is gradually finding its application in real business and companies. Trust in cryptocurrencies, as well as their capitalization, is growing.

Against this background, statements are heard in the media from some governments about the successful integration of blockchain into control and management systems. Banks are talking at a break, about the success in issuing their digital currencies (CBDC). In China, this has already been introduced, and cryptocurrencies have been completely banned. International organizations talk about global cyberattacks. The most popular social network, with three billion subscribers, announces the launch of its new stablecoin, for some reason changing its brand, and making deals with governments.

No one pays attention to this, as they are busy with the process of making a profit. On Coinmarketrate.com the list of cryptocurrencies increases, etc.

Suddenly there is a global failure of the Internet (error, attack – it does not matter). The network will either be impossible to restore in the guise in which it was, or a new generation of the network will be launched, in which everything is not as we used to. There is nothing there but a huge social blockchain registry, with social ratings and other features. There are no usual search engines, movie sites, no darknet, and no cryptocurrencies. They were replaced by the central bank’s currency – CBDC. Users’ wallets have simply disappeared, but there is no sense from cold ones.

Or simply, one day, the CBDC will be put into effect as a single digital currency for all people, and the cryptocurrency will simply be disconnected from the payment system. Fiat is withdrawn from circulation. Perhaps Bitcoin will remain as digital gold. And there seems to be a crypt, and there is no sense from it.

And based on all this, the question arises: can so many techies, entrepreneurs and other enthusiasts be wrong? Or is an objective view of reality sometimes clouded by huge speculative profits?

Overview

People have never been able to predict the future. This is all the more true in times of exponential technological progress. In this respect, probably, such a prospect is far from the truth. Even the most terrible scenario may turn out to be too optimistic.

Or maybe he is too naive and missed the opportunity to truly understand the significance of this young technology? It’s up to you to think about it. However, we are convinced of one thing: the development of the industry in the next few years will be incredible.