Posted on 09/05/2019 7:06:07 AM PDT by blabs
If you're not familiar with the term "Bretton-Woods" and "Petrodollar", allow me to provide a brief summary.
To help fund World War II, the US ratified the Bretton-Woods agreement, essentialy creating Fiat money (tying only a small fraction of Gold to the US Dollar). Since the US controlled 2/3 of the worlds gold, it placed the US Dollar as the world reserve currency and created the ability to print money on demand (then ultimately leading to a complete severing of gold and the beginning of the endless devaluation of the US Dollar)
Bretton-Woods was terminated in 1971, and the Petrodollar was put it it's place to help alleviate stagflation. In a nutshell, world oil sales were priced in US dollars, and any country wanting to buy or sell oil on the exchanges had to swap currencies to US Dollars in order to facilitate the transaction. This created a recycling of US dollars, helping to maintain the US dollar as the world reserve currency, and creating liquidity and demand for assets.
Today, the US Dollar is losing its world reserve status, being challenged by both established and emerging economies who have their own currencies, their own oil, and their own exchanges, thereby eliminating US Dollar recycling.
Bitcoin and Ethereum are eerily similar in comparison. Bitcoin being the first out of the gate, established its value and dominance as the reserve internet currency (Bretton-Woods). Bitcoin was sound, but slow, and soon Ethereum was born (Bretton-woods was terminated), and Altcoins began to emerge mostly based on the Ethereum blockchain technology. To purchase these Altcoins (oil), you first had to buy Bitcoin/Ethereum (Petrodollars) which could then be used to purchase the Altcoins. To sell the Altcoins and cash out, you have to reverse the transaction (recycle) back to Bitcoin/Ethereum. And of course each of these transactions incur a cost, thereby inflating the value of the crypto-currencies and bringing liquidity and demand.
Each day as more blockchain economies emerge, along with their own crypto-currencies, more exchanges are being established to host and facilitate trading of these new currencies. Many exchanges now offer the ability to skip the Bretton-Woods/Petrodollar system (Bitcoin/Ethereum pairs) and allow Altcoins (oil) to be purchased directly with the currency of their choice (including other crypto-currencies), challenging the dominance of Bitcoin and Ethereum.
In it's simplest form, think of these blockchains as their own country (an ecosystem of computer networks) in which their technology can function. They are nice countries, but the problem is that not many companies/customers are moving into these countries, thereby leaving just an empty infrastructure (china's ghost cities come to mind), sucking the investor money pool dry and leaving those holding the coins trading for small margins, waiting for its value to improve. In order for these blockchain ecosystems/countries to thrive and their crypto-currency to attain (and then maintain) a value, it must have and retain customers. In essence, crypto-currency is almost like a stock share, a small stake of ownership, which may gain worth or become worthless based on the performance of the ecosystem. In order for the value of the crypt-ocurrency to increase, it must be used, and used often.
So why aren't companies eager to move into these fancy new ecosystems/countries? The reasons are numerous, but primarily it is due to three major factors: security, accuracy, and speed. Security and accuracy are still being proven. With a litany of bugs and incurred losses from hackers and human error, many companies are reluctant to stake their reputation on these systems and are taking a wait-and-see approach as the technology improves. A recent study of blockchains in South Korea (one of the largest blockchain incubators) showed that less than a quarter of any blockchain companies had any sales , which means 75% of all blockchains are empty! And then there is the speed factor. Bitcoin averages 3-5 transactions per second (TPS). Ethereum averages 10-15 TPS. Many blockchain transactions also need data feeds/links, referred to as Oracles, where performance is impacted even more. To help alleviate these bottlenecks, side-chaining and sharding technology is being implemented by other blockchain competitors. However, these alternative technologies are not without their own pitfalls, technical challenges, and security flaws.
Adoption of a blockchain technology must provide a value and a benefit to the customer. Though security and accuracy are of primary importance, do not underestimate the need for speed. Consider Visa, the credit card processor. Using its current non-blockchain technology, Visa averages over 20,000 TPS. Many other financial powerhouses and institutions average the same. As an enterprise class corporation, would you stake your reputation (your customer base) on a platform that can only deliver 1/10000 of your current speed? Many of these Altcoin blockchains were quick to stake their business models and platforms on a technology that is already outclassed and outdated, and have very few to any customers. Sure, there will always be customers that don't necessarily require high transaction speeds, and some of these current blockchains may still provide a useful service (if they survive), albeit at a significantly discounted rate as these ecosystems will claw and fight to establish and retain a customer base. And though Ethereum is attempting to launch a new version 2.0, and Bitcoin attempts to elevate itself as the native Internet currency, it may be too little too late (and does the internet really need a native currency?) The future of crypto-currency and decentralized internet requires stability and flexibility, not a financial overlord. As more business and individuals begin to accept crypto-currency, they will naturally gravitate toward accepting stablecoins that provide a store of value, a currency that does not wildly gravitate and gyrate, which is something that Bitcoin, Ethereum, and most Altcoins have yet to prove. Bitcoin has barely recovered 50% from its $20,000 peak, demonstrating that it behaves more as a share of stock than a true currency.
Lastly, the future of 5G technology and IOT (the "Internet of Things") will require speeds that neither the Bitcoin or Ethereum blockchain can provide. Consider the newest blockchain technology called Direct Acyclic Graph (DAG). DAG can achieve a speed of 300,000 TPS without the use of Oracles, side-chains, or sharding. That's 100,000 times the speed of Bitcoin (and that's just initial speeds - DAG technology is almost infinitely scalable!). As of today, there is no blockchain technology that can touch the speed and power of DAG. It's the reason why real customers such as BMW and even the US Air Force are beginning to adopt this technology. And with stablecoins that are pegged to existing fiat currencies (backed by actual governments and real countries), it becomes evident that the value of Bitcoin, Ethereum, and many other Altcoins will be based on actual earned value, not perceived or vested.
The writing is on the wall. Invest at your own peril!
It utilizes tripe-attribute permissions and semantic standards. DAG only moves forward, never encountering the same node twice, and can communicate asynchronously. Take a look at Hedera Hashgraph, Fantom, and Constellation. DAG is being hailed as blockchain 3.0 (even though it doesn’t use blocks), and IMO is the future of the internet.
“The coins that are issued by the blockchain are its currency’
no blockchain “coin” is a currency as they lack almost all the attributes of currencies; blockchain “coins” are merely vehicles for speculation lll
the primary attribute of all useful currencies is UNIVERSAL believe or acceptance that they have value. Of course useful currencies have other attributes such as Portability, Indestructibility or Durability, Homogeneity, Divisibility, Malleability,Cognizability, and Stability of Value.
“the primary attribute of all useful currencies is UNIVERSAL believe or acceptance that they have value”
The coins do have value to their native blockchain, as they are required to utilize the blockchain ecosystem and technology. As its value increases within the blockchain it begins to have a perceived value outside of its blockchain, and can become a valuable asset (which is why I look at them as more of a share of stock or a piece of ownership rather than money).
Yes, today many of these coins are merely for speculation as they have no customers, hence no asset value except for faith and promises. However, value can be perceived by both a buyer and a seller, and if a mutual perception is achieved, the coin can assume the attributes of currency, which in reality is just a tender of exchange.
So yes, these are useful currencies within their ecosystems, and have a value, whether perceived or vested. However there is no such thing as UNIVERSAL belief in any currency.
2 issues raised by this article:
1) The cruel result of fiat currency and central banks printing money. It is a tax on all citizens. I take 3 items, bread, apples and cars. From 1975 to now they have risen in inflation adjusted prices far more than wages. So while sure we can buy cheap I phones we can’t eat them. REAL cost of living (housing food and gas) have spiraled wildly out of control. A direct result of governments not living in their means.
2) Bitcoin: not an expert, but I see it has sharply rebounded off its lows.
Yes, now imagine if the POTUS was successfully removed by the soft coup. The world doesn’t appreciate how important American stability is to the world system. America turning into another Mexico would be bad bad news for the world economy.
Yes. And the USA just missed going full Roman EMPIRE when the coup failed.
Probably so but the game isn’t played yet. We are yet to see if it works out.
Yes if we fail to indict and convict any of the conspirators we will be in bad shape.
Do you see any signs indicating it is about to happen? I don’t.
Nope and I don’t understand why since the POTUS could direct the AG to do so.
See, you mentioned it too. So maybe Roman Empire is still there.
“However there is no such thing as UNIVERSAL belief in any currency.”
sure there is: the U.S. dollar is practically the world’s currency ...
Thanks for the link.
Thanks for the detailed explanation.
The dollar gets its value from the taxing power of the United States and the fact that the Treasury accepts dollars as payment. It’s an insight first used by Alexander Hamilton, when he rescued the Continental Dollar from oblivion. Any good biography of Hamilton will discuss this.
“The dollar gets its value from the taxing power of the United States”
the taxing power of the U.S. is a direct function of the economic might of the U.S. If the economy of the U.S. was on a par with a country like, say, Venezuela, our currency would be equally as valuable as Venezuela’s ...
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