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Last year, mainstream media mostly reported on blockchain technology, but this year there are more and more reports on digital currency, from Facebook's Libra to the People's Bank of China's upcoming issuance of digital currency. These important messages tell us that people have gradually recognized that digital currency can also bring benefits. What follows is the research results in the field of digital currency. One day in the future, we may even see the legal issuance of digital currency.
In reality, most people who participate in digital currency are looking for wealth and freedom. Even now, many investors are still paying attention to the price of digital currency. For example, the digital currency that the People's Bank of China is about to issue does not use blockchain technology. The main value of this type of digital currency is to play a transmission role. And those ten-fold and hundred-fold coins on the market, after being fanatically sought after, have only ended up in a mess.
The price of Bitcoin is not always stable. Without a stable value, why is it still sought after by many people? For example, most of the small mining coins whose prices have increased by a hundred times have no value support behind them. How should we judge the value of digital currency?
POW vs. POS, which one is better?
This article takes small mining coins as an example to analyze the value of digital currency. First of all, we need to understand what small mining coins are? Small mining coins refer to small-cap currencies that use POW as a consensus mechanism and rely on computing power to mine. Conceptually, we can see that the biggest feature of small mining coins is POW consensus.
Currently, the two most common consensuses in blockchain technology are POW consensus and POS consensus. POW consensus is called the proof-of-work mechanism, which is also the mining mechanism that everyone is familiar with. The benefit of this consensus is that the more you work, the more you get, and your input is proportional to your labor; POS consensus is an optimization based on POW consensus. Through the practice of POW consensus, it is found that the waste of resources is quite serious, so there is POS consensus. Once you hold it, you can get income, which is the same as doing business. The more money you can invest, the more you get.
Therefore, for most people, it is fairer to adopt POW consensus, and get corresponding rewards according to their abilities. In the POS consensus process, the more coins you hold, the more benefits you get. At the same time, you also have more rights, which will gradually become centralized for the community ecology. It should be pointed out here that neither is absolutely safe, but POS is easier to be controlled, such as the Ethereum DAO attack. The Ethereum DAO project was launched in April 2016. It raised $150 million in 28 days, becoming the largest crowdfunding project in history. As a result, it attracted the attention of hackers, who exploited loopholes in the smart contract to transfer 3.6 million Ether, directly causing Ethereum to drop from more than $20 at the time to around $13.
According to official sources, there are probably no more than 100 people in the world who are familiar with the code and mechanism of TheDAO. A similar situation has occurred in the history of Futurecoin, which is also a POS consensus. 50 million Futurecoins were stolen, accounting for 5% of the total.
Judging from these two cases, both POS consensus and POW consensus may be attacked. The main reason for the attack on POS consensus is that the more you hold, the greater your desire will be, and the more people will be able to manipulate the situation.
Currently, the most widely used POW is Bitcoin. The POW consensus obtains Bitcoin through mining, which consumes a lot of energy. To launch a 51% computing power attack, you need to control more than half of the computing power of the entire network. This cost is relatively higher than the cost of attacking the POS consensus.
Therefore, when small mining coins have the advantage of POW consensus, investors will feel that they are more fair and just than other currencies that adopt POS consensus.
The logic of the appreciation of small mining coins
Most people will not choose to invest in small mining coins, even though many of them have a "hundred-fold increase", which is directly related to their appreciation logic. At present, the more famous ones on the market are Image Coin, Turtle Coin, etc. In fact, there are many unknown small mining coins.
Let's take Turtle Coin as an example. It is said that it was originally a fantasy of two people, and then more and more people participated in it. It is a ring-signed anonymous coin with three major characteristics of digital currency: electronic, decentralized, and anonymous. In terms of fame, it is not as famous as anonymous coins such as Monero; from a technical point of view, it may not be able to surpass mainstream digital currencies. However, in the small mining coin market, it has risen 6 times in 2 months, and has continued to gain some consensus and attention. It is said that the development of Turtle Coin can be divided into four stages.
At present, many small mining coins on the market have no value support at all, and some do not even have a white paper. Compared with other small mining coins, Turtle Coin can summarize the development stage plan into four steps. Therefore, it belongs to a type of small mining coin that can survive in the market. The main reason is that its value has been recognized by the community and its technology is still being improved.
The main reason why investors choose small mining coins in the early stage of investment is that their market value and circulation rate are not high, but there is still room for growth, which is one of the main reasons why most of them can obtain high returns in the early stage of development. However, not all small mining coins can rise steadily, which is almost the same as the essence of altcoins.
In the later stage of the development of small mining coins, the originally ideal growth space did not reach the ideal state, and the early participants made profits and left, and the market value also dropped sharply. For example, many small mining coins do not even have white papers or any project descriptions. Can such coins become 100 times more valuable in the future market? Without value support, it is obviously not possible.
Another example is SBTC, which became popular in 2017. Its highest daily increase was over 750%, which attracted everyone's attention. However, there is no information in the market about what kind of mining method SBTC adopts and its technology-related content. It is only said that some functions will be gradually improved around 2018, and gradually it has become a worthless air coin.
Its value in the early stage of development was all due to speculation, and in the later stage, the technology development stagnated and there was no technical prospect to support the project. From this point of view, the law of the market is very simple, the fittest survive, and in the market of digital currency assets, the demand is also changing. If there is no technology to support it, it will be eliminated directly.
Therefore, investing in small mining coins is more like buying lottery tickets. We can only say that any number has value, but we don’t know which number will win the prize on which day.
Summarize
From the POW consensus to the appreciation logic of small mining coins, we can conclude that the essence of small mining coins and altcoins is the same. Although some adopt the POW consensus and some adopt the POS consensus, as long as they have the value application of digital currency and can realize application scenarios, they will naturally not be eliminated by the market.
At present, many altcoins are even showing a development trend that is catching up with mainstream digital currencies. The same is true for the market prospects of small mining coins. Although most of them are doomed to fail, the one that remains is definitely not a product of hype, but a digital asset with value support and application prospects.
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