Sometimes you have to fight fire with fire. The reason cryptocurrencies are so popular is their volatile nature that attracts speculators. There are so many bitcoin and other digital coin millionaires popping up all over the globe, as well as an unlimited supply of new coins coming into the market with every new blockchain platform. It’s no wonder there are over a thousand digital options all ready for trading on various exchanges.
While governments and financial institutions are trying to battle this digital phenomenon, a new concept has emerged in South Korea; “Embrace the Bitcoin,” legalize it and regulate it to hell. Make all coin holders accountable for their coins. Limit trading to a cap, ad limit transfers of funds to a cap. The moment you limit bitcoin, set regulations, make trading and transferring of funds transparently, you end up removing its volatility. You take all the fun out of the chaos and basically turn bitcoin into what it really is, a worthless asset that has no value other than its market demand.
There are two kinds of blockchain platform and two kinds of cryptocurrencies:
The blockchain is the original technology that bitcoin was founded through. The blockchain is a rigid, structured, coded platform. Bitcoin is the derivative of a process that validates a transaction. For every validation process, a “bit” of a coin is “mined” (created) based on a mining algorithm that sets the total limit of coins to be mined over the lifetime of the blockchain. There is another limit, and that is the size of the platform. A blockchain is also limited by the number of computers linked into its network that hash the transactions. So, the larger the network, the greater the number of coins can be released. Although size is not everything, since transactions have to be performed to “mine” coins into existence. This is a linked coin, like Bitcoin and other blockchain derivatives and their value is a based on one constant; the maximum number of the coin that can be mined in the lifetime of the platform. The rest of the value is based on supply and demand.
The other blockchain coin is the unlinked coin, like Ripple, which is more of a scam than a hash. In this instance, the coin has a preset number in existence, more like a stock or share. It is awarded per transaction, making it an in-platform award system.
Ethereum is a divergence from the conventional blockchain; it is an open platform that allows applications to be developed for specific uses. It was created due to the rigid nature of the blockchain, and ever since it was introduced has slowly gained ground and competes with blockchain as a leading platform for transactions. It also introduced the “de-bloated” blockchain issue, where transactions can be controlled rather than being totally public. Ethereum allows transactions to be organized between specific participants rather than all the blockchain users. This speeds up the process, which was another issue with the original blockchain platform.
Platform vs. Coin
Blockchain and Ethereum platforms are starting to dominate various markets, where companies such as Maersk and IBM are coming together in collaboration to create platforms for increasing the efficiency of shipping and supply chain. They are being developed without the addition of a “coin,” and are being developed for their advanced technological features.
Coins, on the other hand, are being developed by small minded companies seeking ways to get rich quick, where unregulated ICO’s are replacing regulated IPO’s. Coins are being used to raise funds as a sort of “loan” basis, but I fact play on the greed of the investor, with the hopes that the coin will explode exponentially and make them all rich very quickly. There is no real initiative in proving the integrity of the blockchain or Ethereum platform.
The Ripple Scam
Ripple is the classic example of this case, where the platform developed is used by banks and financial houses. Ripple is the coin used to pay for transactions, or a sort of middle currency, which is totally unnecessary. Banks do not need a middle currency to oil the process, all they need is the speed and security of a blockchain/Ethereum platform. (Just like IBM/Maersk). The issue with Ripple is that it is not transactional based, the company “created” billions of coins, released 50% to the market and waited for the coin to get a value. They hoped that their involvement in banking transactions would give them “credibility,” but in fact, their whole business model is a total scam and misappropriation of trust.
Legalization and Regulation
Governments are now facing down the dangers of cryptocurrency exchanges and emerging coins by changing their method of engagement. Rather than crying foul and trying to make coin illegal, they are embracing the system. Legalizing it, making it into a real asset, (not a currency) and developing rules and regulations for trading and transferring coins.
Through legalization and regulation, the decentralization of coin will evaporate, and criminals, as well as speculators, will want to find other ways to earn tax-free income. Perhaps the South Korean initiative will make two prophecies come true; Bitcoin will become a legal “currency,” but at the same time it will burst the bubble and destroy “Bitcoins” attraction.