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Who has the final say in digital currency?

New and old forms of money
 
In recent years, the price of bitcoin has soared and plummeted, which has aroused the exclamation of onlookers again and again. The "wealth creating effect" and "poverty creating effect" are shocking. The saying that "one day in the currency circle, one year in the stock market" is also widely spread.
 
On January 3, 2009, Nakamoto invented the bitcoin system and excavated the first block, also known as the "creation block". Bitcoin first produced a price in 2010. The sign is that a programmer exchanged 10000 bitcoins for two pizza worth $25, that is, the initial bitcoin transaction price was only $0.0025.
 
 
 
Up to now, according to FTX market data (August 4), bitcoin has exceeded US $39000 and is now quoted at US $39128, with a 24-hour increase of more than 1.97%. Throughout the past decade, the price of bitcoin has increased ten million times.
 
Even more shocking to the industry is that in June this year, El Salvador, located in Central America and focusing on agriculture, announced that bitcoin would be included as the national legal tender, becoming the first country to use bitcoin as the legal tender. Before that, the country mainly used Cologne as the main currency.
 
Money is the hub of market economy, and its importance is self-evident. At present, countries' acceptance of encrypted digital currency is not consistent.
 
The United States has a positive attitude towards encrypted digital currency and focuses on strengthening the supervision of digital currency transactions. In 2014, California passed the ab129 act, including the substitution of dollars for digital currency, points and coupons as legal currency. In the same year, New York incorporated the regulations on cryptocurrency management and bitcoin license into the New York financial services laws and regulations, and launched the supervision of bitcoin.
 
China is cautious and opposed to cryptocurrencies such as bitcoin and ether. In June 21st, the central bank announced that it had provided services for banks and Payment institutions to speculation in virtual currency transactions. It also talked about some banks and Payment institutions such as ICBC, agricultural bank, construction bank, postal savings bank, industrial bank and Alipay (China) Network Technology Co., Ltd. The move aims to crack down on the speculation of virtual currency transactions such as bitcoin and maintain financial security and stability.
 
Looking back on history, with the changes of technology and system, the form of money is also changing. However, in most of history, the evolution of money form is slow. It is generally believed that it has mainly experienced several main stages, such as physical money, metal money, coinage, paper money and legal money. Each change of money form is carried out to meet the needs of social and economic development.
 
The main feature of early physical money was that it was scarce or could be widely used. People generally agree with its value, so they are willing to accept such kind as a medium of exchange. Agricultural tools, cattle and sheep, stone tools, shells, cotton and grain have all served as money in different historical periods.
 
After years of natural elimination, in most societies, items used as money are gradually replaced by metals. As Marx said, "money is not gold and silver by nature, but gold and silver are money by nature". Scarce gold, silver and copper with difficulty in smelting have gradually become the main monetary metals.
 
However, physical money is often difficult to store, transport, segment and test. With the expansion of commodity exchange demand, physical money has many inconveniences in exchange, and paper money was born.
 
Jiaozi, which appeared in Sichuan during the Song Dynasty, is the earliest paper money in the world. It is completely decoupled from physical goods, marking the emergence of credit currency. Paper coins issued by countries all over the world and legally protected and forcibly circulated belong to credit currency. At present, paper money has become the main currency of countries all over the world.
 
 
With the rise of computers, the Internet and blockchain, there are many new currency forms, such as electronic currency, digital currency, virtual currency, cryptocurrency, cryptocurrency, decentralized currency and so on. However, the existing classification of currency forms fails to clearly define the new currency forms.
 
Generally speaking, electronic money is the information process of the existing legal tender, including bank cards, Internet banking, electronic cash, and the third party payment developed in recent years, such as Alipay and QQ music. Virtual currency is limited to the circulation in a specific virtual environment, and only supports the one-way circulation from legal currency to virtual currency, such as Tencent's Q coin Q point, Sina's Micro coin, etc.
 
The concept of digital currency began to appear in the 1990s and is in the process of exploration and development. However, there is no unified definition at present, which generally refers to digital and electronic currency, which can be divided into private digital currency and legal digital currency.
 
Three key points in understanding money
 
To analyze the current complicated forms of money, we must consider three aspects: the essence and function of money and its relationship with intermediary organizations.
 
From the essence of money, any money must have or represent economic value. Therefore, the first question to consider when analyzing any monetary form is where its economic value comes from. Goods that have no economic value or support of economic value cannot become money.
 
Money is either an item of economic value itself, such as gold; Or it is a monetary representative supported by economic value, such as the currency of a sovereign state, which is based on all the economic values that a sovereign state can control.
 
If the digital currency can have a better economic value basis than the currencies of sovereign countries, it means the birth of a world-wide new currency, but this is impossible in today's world environment, because the reserve assets completely beyond sovereign countries either do not exist or only gold can bear.
 
 
From the function of money, there are mainly three kinds: first, as a means of circulation, it acts as a medium for the sale of goods; Second, as a valuation unit, it measures the value of commodities; Third, as a store of value, it has become a means of storing wealth or purchasing power. Items that do not bear any monetary function cannot become money.
 
The three functions of money are indispensable and exist as a whole. The three functions can be undertaken by one kind of goods or by a variety of goods. Accordingly, there are single function currency, dual function currency and full function currency.
 
As a fully functional currency, gold is a classic representative of a comprehensive understanding of currency. Gold is a rare metal with strong stability and easy preservation. Therefore, gold itself has economic value. In history, it has not only been used as currency and directly used for economic transactions, but also as an economic value basis to support the currencies of sovereign countries, such as the US dollar. So far, it has been stored as reserve assets by central banks of various countries, and it is still a part of the monetary and economic value base of sovereign countries.
 
Other currencies that only bear part of the functions can be fully functional only when combined, so as to form a monetary system. For example, the unit "Yuan" of RMB is used for bid price and value measurement function, paper money, coins, bank account numbers and other forms are used for payment, and economic values and rights and interests such as yellow gold bear the function of value storage.
 
According to whether money needs intermediary organizations to participate in the operation, two kinds of relations can be formed: Central and decentralized.
 
The operation of monetary form with the participation of intermediary organizations has the function of social system, reflects the will, value and ethical preference of a certain social system, and the choice in economic activities is restricted by social rules. At present, the main currencies of all countries belong to "central" currencies.
 
The operation of monetary form without the participation of intermediary organizations has no social system function. It is purely a tool for economic exchanges and value preservation, which is neither controlled nor tracked. Such as "decentralized" bitcoin.
 
In the modern scientific and technological environment, the new currency form without intermediary organization can be created technically. The problem lies in how to solve their social functions, so as to ensure that the operation of the new currency form will not be independent of the social system and will not oppose the social system, values and ethical norms.
 
At this stage, private digital currencies, such as bitcoin and Ethereum, are more like investment products. Because of the lack of strong guarantee institutions to maintain the stability of their prices, their role as a value measure has not yet appeared, and it is difficult to act as a means of payment.

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