The last two months have shown a major shift in tone when it comes to the digital currency space. It wasn't too long ago, just back in July, when stock traders had declared Donald Trump as the killer of Bitcoin after he moronically tweeted out claiming its value was based on thin air. It's not certain whether or not he legitimately thought he could topple the foundation of Cryptocurrency, but it certainly made his lack of understanding regarding what this new phenomena actually is extremely transparent. But I don't think this lack of understanding is limited to Trump, I think this new technology remains unclear among a large majority of the establishment. So what happened on Tuesday that shook the establishment to its core?
"Every major central bank is currently taking a deep look," Powell said at a Congressional hearing on Tuesday. "We feel that's our obligation, technology has now made that possible. I think it's very much incumbent on us and other central banks to understand the costs and benefits and tradeoffs associated with a possible digital currency."- Jerome Powell, Chairman of the Federal Reserve
The hearing had a far reaching effect across the Cryptocurrency space causing a significant price rally the following day. The sudden public interest from the Federal Reserve appears to be driven by the efforts of China to create their own Digital Currency, but I'm certain that this is not the first time it has crossed their mind. The US government attempted to model this technology back in the 1990s, which I'm sure the white paper largely influenced Satoshi Nakamoto's work when they designed Bitcoin, but they couldn't solve the problem of double spending. That is because the original model was built to be compatible with our financial system and not on a distributed ledger, which is something that's raising concerns for me today with Federal Governance entering the space. I'm worried that these new federal currencies could drastically affect the demand for the Cryptocurrencies that we have today, not because of the value of the federal assets themselves, but a decrease in the value of coins like Bitcoin. The reason being that these coins could provide the global governments a method by which Bitcoin and other cryptocurrencies can be tracked, damaging the underlying value of the networks by essentially centralizing them.
Not in the sense that they would be seizing the networks, at least not by force. Rather, by a means of controlling how you buy them. If the US were to (likely are going to) create a digital USD, they could design a law wherein if you desire to buy an asset like Bitcoin, then you are required to use digital USD to facilitate that. This could be the perfect method of doing so since they would have knowledge of who's buying it, where they are buying it, and how much they are buying. This could lead to massive abuses of power like limiting who can buy these coins and limiting the number of which you can buy, ultimately centralizing a trustless marketplace. Potentially even resulting in things like price manipulation by controlling the circulation using limitations on purchases and sales of the currencies and stronger regulations on exchanges or even centralizing the supply itself by buying up a large percentage for themselves. So contrary to the majority of these markets getting excited over news like this, I'm rather skeptical if this is really a good thing at all. I think the federal government as well as institutions entering the space blows the door off the hinges to large scale centralization and corruption by such powerful forces. (SO SCREW YOU RIPPLE)
So while I'm as guilty as everyone else for taking advantage of the opportunity to say "I told you so" I ultimately feel like this should not be something that's "Good news." However, just because it poses a threat to the value of these currencies, it will undoubtedly facilitate rapid innovations in this space and finally unlock its maximum potential. Blockchain was created to empower the little guy against the corporation, but as industries develop and show their potential, it becomes an inevitability that bigger and more resourceful players will take the reins and take it to new heights. So while it seems unfair as the little guys because it will inevitably become less profit for you and more to them, it becomes a necessary evil when it comes to passing the baton to someone who can take the project that you've cared about to levels never thought possible.
“Society in every state is a blessing, but government even in its best state, is but a necessary evil; in its worst state, an intolerable one.”
Thomas Paine, Common Sense, 1776
But, I'm curious, what do you guys think?
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