Just as email is the first killer application on the internet, cryptocurrency is the first killer application on the blockchain. The killer application is an application essential for the spread of new technology to the general public. Just as emails running on Internet Protocol 1.0 initially had speed issues and couldn't send images, Bitcoin and Ethereum running on Blockchain Protocol 1.0 are also experiencing speed issues today. However, this is expected to be overcome soon by improvements in infrastructure or algorithms.
In the blockchain, the absence of a central entity means that there is no central server. So far, a large amount of capital has been spent on scaling the central server, and focusing on its security, the blockchain's philosophy is to eliminate the central server and share the transaction records with everyone. This eliminates the need of security itself. Since the transaction records that were kept only on the server are copied and distributed to all, there is no need for security anymore. This is a paradigm shift in thinking from a security perspective.
What is Decentralization?
The Internet was also initially banned in Korea because it had no central entity, but because of its spread around the world, the policy of seclusion was quickly overturned. Imagine a world without the Internet now! Likewise, public blockchains and cryptocurrencies that do not have a central entity are currently being sanctioned by governments including Korea, but the 'Specific Financial Information Act (Special Law)' passed by the National Assembly in March 2020, and it is expected to be eased soon, as the enforcement of the law is expected from March 2021.
Specific Financial Information Act
Blockchain can be said to be Internet 2.0 because it has ushered in an era of information sharing that cannot be duplicated by using the blockchain technology from an era of information sharing that can be easily duplicated on the Internet. This means that there'll be a shift from an era in which information distributors make money to an era in which information creators make money.
Blockchain is Internet 2.0
The year 1990, started a rapid growth of the Internet, was about ten years since the Internet became known to the general public, but this year is about ten years since blockchain came into the world. Technologies like the Internet are called Fundamental Technology, and just as the Internet has changed all brick and mortar industries, blockchain will change all online industries over the next 30 years. Just ten years ago, the cryptocurrency that started with a market capitalization of $0 is currently exceeding $400 billion. The move from central finance to decentralized finance has already begun. What will happen in the next ten years?
Cryptocurrency Market Cap
David Marcus, Facebook’s top executive on the Diem project, said to the US Congress, that China is currently preparing a digital yuan. If this becomes a reality, the US dollar hegemony may disappear. Therefore, the US government should give the right to issue cryptocurrency to Diem Association. The Fed started as an alliance of commercial banks in the US, not an official organization under the US government. Marcus said that if the US government chooses Diem Association because the Fed doesn't understand digital, Diem could someday replace the Fed and support the US government. In James Rickard's book The Currency War, the fiat currency's history and how the transfer of hegemony from the British pound to the US dollar is described in detail. It could be helpful to read it to understand the present and future of fiat currency.
Facebook vs. Digital Yuan
If the value of gold comes from analog scarcity, the value of bitcoin comes from digital scarcity. Just as there is a limit on the amount of gold mining on the planet, the limit on the amount of bitcoin is also set at 21 million by the software algorithm, and digital scarcity is created because it cannot be changed due to maintaining the blockchain's immutable functionality. Therefore, it is expected that the current market capitalization of cryptocurrency will be close to or exceed the market capitalization of $10 trillion of gold from the current $400 billion. This is because it allows you to store and transfer large sums more efficiently and faster than gold, which provides the same basic scarcity in essence.
Analog vs. Digital Scarcity
Analysis of the current cryptocurrency trading volume reveals that the Chinese are using cryptocurrencies to avoid their own government oppression. Countries such as Russia, Iran, and North Korea are using them to resist the US dollar hegemony. Even the NASDAQ listed companies and global hedge funds are using them to diversify their investments, which is already widespread in our society around the globe.
Crypto Trade Volume
There are clear limits to the future of cryptocurrencies issued by governments like China or large corporations like Facebook. In the early days of the Internet, the public Internet was initially smaller in size due to several private networks such as AOL and CompuServe in the US, and Hitel and Cheonlian in Korea's early traction. You cannot find these private networks anymore because they did not offer the same freedom as the Internet. Likewise, it is said that the government or large corporations' cryptocurrency is not enough to gain full public trust, because of the possible formation of a surveillance society and/or invasion of the private life of individuals.
Private vs. Public Networks
Milton Friedman predicted that if cryptocurrency becomes prevalent, the governments will find it challenging to secure tax revenue, but with the advent of decentralized finance, this is likely to become a reality. This is because taxes will be incurred at the point of one-time transfer from fiat currency to cryptocurrency through the exchange, but it is unlikely the physical governments will have an easy time taxing the virtual cryptocurrency.
Milton Friedman Prediction
In the case of large corporations, just as emails stored in the cloud were excluded from government investigations, cryptocurrency stored in the blockchain is highly likely to be excluded from government investigations that may invade in the future. Cryptocurrency can be described as a new Swiss bank.
Crypto is the New Swiss Bank