Is Bitcoin Obsolete?

Once upon a time, Bitcoin was the most fashionable topic in the technology circle. It not only had a miraculous increase in value, but also had gossips such as Silk Road black market transactions, and was supported by large amounts of funds from Silicon Valley venture capital circles. Today, various digital currencies such as Ethereum and Monero have emerged, and blockchain technology has replaced digital currencies and become the new favorite of venture capitalists. When people talk about Bitcoin, it is no longer a new thing. Some people even say to Martians: "Why are you still working on Bitcoin? Isn't it outdated?" The digital currency and blockchain technology industries are still hot, but will Bitcoin still remain competitive? In this article, Martians will talk about this topic.

The Counterattack of Altcoins

Bitcoin is a digital currency based on an open source protocol. Since the code is open source and transparent, it means that imitators can easily create a new digital currency. This is also true. After the birth of Bitcoin, various other digital currencies have emerged one after another, and most of them have died naturally. The first successful case is Litecoin. Litecoin puts forward a statement that Bitcoin is too "expensive" and not conducive to trading. The number of Litecoin has increased four times compared with Bitcoin, and a new Script encryption algorithm has been adopted. The slogan "Bitcoin Gold Litecoin Silver" has also been deeply rooted in the hearts of the people. The current market value of Litecoin is about 190 million US dollars. The creation of Ethereum is more unconventional. It emphasizes non-financial attributes such as smart contracts and Turing completeness. More applications can be created based on Ethereum, and the DAO incident has brought Ethereum into a more bizarre fork event. There are currently two types of Ethereum, referred to as ETH and ETC, with a combined market value of about 1.1 billion US dollars.

Some digital currencies have begun to focus on anonymity. Unlike what most people imagine, Bitcoin cannot be used for money laundering. Bitcoin's blockchain is open and transparent, which means that everyone can view all transfer records. Several startups are already developing anti-money laundering monitoring applications for the Bitcoin network. In the online world, there is a huge underground black market, where products traded include hacker-controlled bots, paid accounts for pornographic websites, drugs and hallucinogens, etc. These traders have extremely high requirements for anonymity and security. Where there is demand, there is supply. Dash DAS and Monero XMR focus on anonymity and use different technical solutions. Currently, DAS has a market value of 70 million US dollars, while XMR has a market value of 150 million US dollars. Another highly anticipated anonymous coin, Zcash, will also be officially launched next month, and it is expected to set off a wave in the digital currency world.

So can altcoins challenge Bitcoin's position? In the eyes of Martians, such a chance is slim . After 7 years, Bitcoin has formed a huge industrial chain: from upstream chip design, mining machine manufacturing, mining machine hosting; to midstream spot trading, leveraged trading, futures trading; to downstream payment settlement, cross-border exchange, wallet applications... Compared with Bitcoin, other altcoins are obviously at a disadvantage, and most altcoins do not even have mobile APP wallet applications. In terms of the most critical liquidity, Bitcoin is also far behind other digital currencies, with a daily trading volume of 130 million US dollars. The billions of dollars of venture capital attracted by Bitcoin have begun to establish a moat for the industry, from core code development to exchange construction, wallet application construction, and Bitcoin payment companies have conquered the e-commerce field, all of which are not available in altcoins.

Although people are happy to see the drama of the loser's counterattack, in the world of the Internet, the first-mover advantage is very important, and Bitcoin is still the king in the field of digital currency.

The Challenges of Blockchain

How hot is blockchain now? If you don’t know about blockchain in the financial field, then you are simply a caveman. In 2016, venture capital in the blockchain field exceeded that in the digital currency field, reaching 1.6 billion US dollars. Various media also began to praise it. The Economist gave a full-page cover to blockchain technology. Bloomberg believes that blockchain has begun to change the financial industry. Goldman Sachs released a report saying that blockchain technology can save the financial industry 6 billion US dollars every year. IBM and Microsoft also launched blockchain business solutions BAAS... So suddenly, people all over the street are talking about blockchain technology. Some people even declared: "Bitcoin is dead, blockchain is immortal." Bitcoin is trying to challenge the traditional financial system, while blockchain is trying to integrate with the traditional financial system. Different choices will inevitably lead to different market feedback.

The latest article from Bloomberg is worth thinking about: The core technology of blockchain technology has existed for many years. Distributed servers, asymmetric encryption and timestamp technology are not new concepts. It seems that combining these technologies has never been a complicated thing. The real difficulty is that the companies that provide these services are not willing to do so. Each bank has its own independent set of ledger systems, and because of various concerns, they are unwilling to share with other banks. Now banks have proposed the concept of "alliance chain". For example, UBS, Deutsche Bank, Santander Bank, and Bank of New York Mellon have tried to jointly issue a digital currency called USC, which will be directly registered in the central bank database. The Bank of Canada has begun to try to use blockchain to issue CAD-Coin, and the Bank of England and the People's Bank of China have announced the start of blockchain trials. In the past year, blockchain has been fully recognized by mainstream financial institutions.

But is blockchain technology really that magical? This is still a big question mark. Except for the field of digital currency, blockchain technology does not seem to create similar value in other fields. How to ensure the security of distributed storage? In the field of digital currency, it is achieved through cloud computing (commonly known as mining), but other commercial uses of blockchain have not yet proposed a more convincing solution for data security. Distributed ledger technology faces more problems. How decentralized technology can adapt to centralized supervision, and how the irreversibility of blockchain data can be coordinated with a large number of frauds and legal judgments in the real world, there is still a long way to go. The original intention of blockchain technology is to establish a system with a zero-trust mechanism, but financial institutions including central banks are trying to establish a single-node trust system, which is contrary to philosophy.

Blockchain technology is booming, but there are few projects that have been put into practice; the Bitcoin circle has died down, but the ecosystem is becoming increasingly full.

Anchor of digital currency

In the traditional financial world, the word anchoring has a long history. Since the government began to control the supply of paper money, the economic system often collapsed in hyperinflation. In order to build a more sustainable financial system, the United States led the Bretton Woods system, anchoring the US dollar to gold and the currencies of other countries to the US dollar. The agreement stipulates that 35 US dollars equals one ounce of gold, and the exchange rate fluctuation between other countries' currencies and the US dollar cannot exceed 1%. However, the good times did not last long. As the United States was involved in the Vietnam War, war spending soared, and the Federal Reserve printed a large number of US dollars to purchase goods from other countries, resulting in a decrease in gold reserves. In 1971, Nixon announced the suspension of gold redemption, and the Bretton Woods system collapsed. Since then, paper money around the world has lost its anchor, so central banks have started a vigorous wave of printing money.

Unlike the currencies issued by the central bank, Bitcoin has a very clear upper limit of 21 million since its birth. With the growth of the Bitcoin ecosystem, Bitcoin is becoming the value anchor of the entire digital currency world: First, a large number of competing coins are issued through Bitcoin to complete fundraising. There is a professional term called ICO, which means the first public fundraising through digital currency. For example, Ethereum obtained 31,531 Bitcoins through crowdfunding at that time, thus opening up its own world; Second, a large number of competing coins are traded through Bitcoin as a medium. Currently, the website with the largest trading volume of competing coins is Poloniex. The settlement currency of the website is Bitcoin, and other digital currencies are traded in Bitcoin as the unit of account; Third, Bitcoin has begun to be linked to other commodities. Platforms such as Bitreserve have begun to provide trading functions for commodities such as oil and gold, using Bitcoin as the settlement currency.

Bitcoin technology is becoming more mature, and the relevant laws of various countries are becoming clearer. The New York Financial Services Authority has launched a Bitcoin banking license, and other major countries are also following the mainstream. For example, Russia once banned Bitcoin, but is now revising this decree. Bitcoin's circulation channels with legal currencies are basically smooth. The US dollar, euro, and RMB all have Bitcoin exchanges with large trading volumes, and platforms such as Localbitcoin have made Bitcoin OTC transactions a reality. Bitcoin is currently working on the liquidity problem between legal currencies, while altcoins are working on the liquidity problem between Bitcoin. Taking Poloniex, the largest altcoin exchange, as an example, the trading volume denominated in Bitcoin exceeded 90,000 Bitcoins in the past 24 hours, which is equivalent to a trading volume of US$55.35 million, while the average trading volume of Apple's stock is 31.99 million. The trading volume of digital assets denominated in Bitcoin has already exceeded that of Apple's stock.

Bitcoin holds high the banner of digital currency, and the entire digital currency community is united around Bitcoin.

Summarize

People tend to overestimate new things in the short term and underestimate them in the long term. There are fewer news about Bitcoin, but more applications related to Bitcoin, and the entire ecosystem is more mature. People surrounding Bitcoin are no longer a group of boastful idealists, but more down-to-earth entrepreneurs. When the profit model of the blockchain industry was still B2VC, the Bitcoin industry had already embarked on a healthy path of making a fortune in silence. Bitcoin is not only not outdated, but has shown more tenacity as time accumulates.