Blockchain Arms Race
Blockchain technology is showing no signs of slowing down in 2021, and many questions arise about the industry’s future. Learn the basics about cryptoassets and decentralized finance here. Uncertainty in this industry raises questions, most importantly, will there be a prevailing blockchain and digital currency used as a global or even multi-planetary standard?
Blockchain Superiority and Government Intervention
Since the creation of Bitcoin in 2009, there are over 10,000 cryptocurrencies with a cumulative market cap of 1.6 trillion Dollars. Like with any currency, its value derives from its wide use case and overall demand. Demand for different currencies tends to change based on market shifts and animal spirits. This uncertainty leads to unpredictable value in the entire cryptoasset marketplace, which is a significant benefit for some. However, long-term certainty is needed to hold consumer confidence within the currency.
In the same light as cryptocurrency, NFTs and their associated blockchains have seen popularity volatility. Volatility for NFT blockchains is more dangerous than cryptocurrency.
If a large organization, like a government, got into the business of Cryptoassets, it could disrupt the entire crypto-economy. In a 60 Minutes interview, Chair of the United States Federal Reserve, Jerome Powell, indicated that the United States was researching the potential of creating a “digital-dollar,” he noted that the creation of U.S. crypto would not be rushed. Thus, they may not be the first government to enter the industry. Hypothetically, imagine the United States did create a cryptoasset on their proprietary blockchain; this could and probably would have detrimental repercussions on all the other blockchains.
As explained here, blockchains require users to hold up the network worldwide to keep the decentralized ledger verifiable for millions of transactions. If blockchain users were reduced, the ability to transact on that blockchain would be affected and possibly eliminated. Essentially, the existence of a blockchain is tied directly with its market popularity. Thus, if a blockchain dies, you lose your assets within it.
An NFT is not technologically transferrable between blockchains; the death of a particular blockchain would destroy your NFT on that platform. Many people within the industry scoff at the idea of a blockchain such as Ethereum dying, but it truly is a possibility, especially if a giant like the U.S. federal government steps in. Because cryptocurrencies can be traded easily, they could coexist with a governmental currency, but probably not NFTs.
Existential Crypto Questions
When a government steps into crypto, does it remove the designed essence of the technology? Should cryptocurrency be decentralized? Can a government coexist with decentralized currencies? Could current governments squash the potential revenue-destroying world that is decentralized finance by creating an international crypto standard? The global banking industry is outdated, but what is needed, a facelift or a complete overhaul?
Watch the 60 Minutes interview with Jerome Powell, here.
