Editor’s Note: This article is an article published on the website MIT Technology Review entitled “Let’s destroy Bitcoin,” which discussed in details the three possible ways that going to be “kill” the Bitcoin.
In 2009, Satoshi Nakamoto (Nakamoto Satoshi) brought a new currency to the world – Bitcoin. This currency can be quickly circulated on the Internet without additional costs. Unlike most currencies, Bitcoin does not rely on central bank issues, but users themselves participate in manufacturing and distribution. It can guarantee the privacy of the trading objects in the course of financial transactions. At the same time, it is theoretically impossible to fake Bitcoin.
It has been nine years since this concept was proposed. There are currently about 24 million active bitcoin wallets in the world. The price of a single Bitcoin rose from about one US dollar in 2011 to a total of US$19,700 by the end of 2017.
However, success must be accompanied by the competition. The most valuable cryptocurrency currently in the market is still mainly the Bitcoin; as of the beginning of April this year, its market value is three times that of its biggest competitor, Ethereum, which is roughly equivalent to the sum of the value of other cryptocurrencies on the market.
Although Bitcoin has established an economy that cannot forge transactions, it cannot prevent the copying of this idea. No one can copy personal Bitcoin, but anyone can copy Bitcoin’s ideas. So how do you think the Bitcoin may lose value or become redundant? The following are elaborated from the perspective of the government, the enterprise, and the general public.
Option 1: Government Takeover
This year is definitely a year when major events will happen. To solve the dollar crisis, the government will issue a federal reserve-backed digital currency called Fedcoin. As soon as the tax payment day arrives, the corresponding amount of Fedcoin will be automatically deducted from the citizen’s electronic wallet.
This currency is a digital version of the currency issued by banks such as coins and banknotes many years ago. Long ago, the central bank began to collect cash and convert it into federal currency. In recent years, there have been fewer and fewer hard currencies circulating in the market. Now, you only need to go to the local bank to verify your identity. The bank will set up an electronic wallet on your mobile phone. Naturally, no coins are needed. However, most people still keep a few bucks of US dollars and treasure it as souvenirs.
The digital currency issued by the Central Bank was generated by a modified version of the Bitcoin blockchain. This hypothetical currency was elaborated by David Andolfatto, research director of the Federal Reserve Bank of St. Louis, and later perfected by Sahil Gupta as an undergraduate at Yale University. Sahil Gupta wrote a research article on how Fedcoin-like currencies work. Along with his colleagues, he wrote code for simulation tests.
In the system they set up, the blockchain, like Bitcoin, can record transactions. However, the Fedcoin account is primarily managed by a Federal Reserve Board certified agency and not by a peerless network. Gupta told reporters: “These authorized nodes may be U.S. banks, JP Morgan (JPM Morgan), basically all trusted institutions.”
Each bank is responsible for a large number of addresses in the blockchain. When a new transaction is generated, the bank will verify the new block and send it to the Fed. Later, as the final arbiter, the Fed will review all records and unify these blocks to become its public blockchain version.
To use fedcoin, people must first show proof of identity and set up a wallet at the Federal Reserve Bank or Union Bank. The Federal Reserve allows the two-way exchange of the US dollar and digital currency – the exchange rate is 1:1. Gupta said that plans like this may gain popularity and eventually lead to the gradual disappearance of cash.
He said: “I envisioned the public first developing the habit of spending Fedcoin on things like groceries and movie tickets.” Slowly, people began to realize that this digital currency is more convenient than cash, and companies realize that it is more than credit cards. Cheaper, the bank realized that it was actually more secure. By then, the dollar would gradually withdraw from the money supply, and the days of replacing it with Fedcoin would come soon.
This is not just an experiment of academic thought. As early as 2016, the Canadian Bank had simulated this currency on a blockchain like Ethereum.
The researchers found that the digital version of the country’s issued currency can match or even increase Bitcoin’s efficiency. Gupta believes that when the central bank lags behind the system (as opposed to the peer-to-peer network that currently records bitcoin transactions), transaction processing should be faster. This efficiency adds up to save a lot of money. The bank should also be crazy about blockchain technology. According to the 2016 report, due to the decline in taxes, fees and transaction fees, only a small portion of the digital currency issued by the central bank will eventually increase GDP by 3%.
Option 2: Facebook’s acquisition
Once again, we began to think ingenuity, not to think too far this time. Because if the right people act together, it is very likely that Bitcoin will disappear tomorrow. This time Bitcoin will be acquired by social media giants. For simplicity, let’s choose Facebook, which claims to have more than 2 billion users worldwide.
Imagine how Facebook can use its popularity to overthrow Bitcoin. Let’s take a look at how Telegram, another large internet company, handles this problem. In January of this year, Telegram’s secure communications application has more than 200 million users worldwide. Subsequently, the company announced that it will create Grams, a cryptocurrency designed specifically for its communications applications, where users can send each other over the Internet or use it for paid services. By February, Telegram raised 850 million U.S. dollars from investors in the first round of financing. By the end of March, another 850 million US dollars was raised in the second round.
So, just like Telegram, Facebook can also publish its own digital currency. Or, it can take a more insidious route: use bitcoin to deal with Bitcoin itself and take it over.
Currently, the rules of Bitcoin are implemented by three associated network operators: users submitting transaction requests, miners handling these requests and writing them to the blockchain, and verification procedures for verifying whether or not standards are met within the blockchain… All three use interoperable software, which allows them to be integrated into a single blockchain.
Any subset of network participants can decide at any time to use another version of bitcoin software, the rules are slightly different, and thus separate from other software to form parallel currency. To be exact, the launch of bitcoin cash based Bitcoin-original chain was officially launched last year. This is an alternative blockchain with slightly different specifications, allowing it to handle more transactions per block.
If Facebook can convince enough Bitcoin users and miners to run their own Bitcoin software, Facebook can control these rules. Then, Facebook can redesign Bitcoin as a corporate version of “Fedcoin.”
However, there is a better way. There is no need to convert a whole bunch of true believers: Facebook can withdraw acquisitions before most people realize what they are doing.
First, it takes a month to create a user-friendly and secure Facebook-issued bitcoin wallet. To put it plainly, the Bitcoin wallet is a container of digital currency. There are many different types – some are hardware, some are software, and their respective security levels and ease of use are not the same. With its vast engineering resources and user experience design expertise, Facebook will not make its wallet worse.
Then, overnight, integrate it into a 2.2 billion Facebook account. The next morning, the Facebook user wakes up and finds a new setting in the profile: a small button with “Send Bitcoin” written on it. The Facebook user’s address can’t use non-significant alphanumeric strings, all of which must be displayed in real names.
For those who have already used Bitcoin, the experience on Facebook far exceeds what they have experienced before. After the experience, they will immediately transfer funds to their Facebook wallet. Those who have not yet owned any bitcoin or have never heard of these bitcoins can choose to earn some bitcoins on the site, usually by watching advertisements or posting.
For those who are tired of advertising, you can mix other interesting features. To get a clean, ad-free experience, users can choose to let Facebook tap Bitcoin using the computer’s unused processing power. In addition, without exaggeration, users can set up a data center and start developing Bitcoin on their own.
Now, let your users apply these remarkable new tools to their daily lives. Give them the opportunity to enjoy instant remittance on Facebook to any friend on the global platform. As a potential asset of Facebook’s recessive reputation economy (likes, comments, and all other behavioral metrics, users gain credibility by placing their own attention on the page), browse the page and make relevant actions, all with real transactions value. Give users time to make them addicted slowly.
Then control Bitcoin. If most people with Bitcoin and those who start Bitcoin are using your software, you can change it as you see fit. Like bitcoin cash, a few people are more rebellious and do not want to continue to use your wallet. Instead, they choose to send their transactions to a few ideologically driven miners who continue to work on the old Bitcoin blockchain. Don’t worry about them. True Bitcoin, bitcoin that is used by almost all peoples of the world, is now yours.
You now have the same power as the Fed holds for the central government’s currency. You are free to cast, block and redistribute coins.
Option 3: Progressive, Diverse Development
Another way to make Bitcoin insignificant is to simply follow the natural course of development. In the near future, goods and services will increasingly be represented by tokens that can be exchanged with anyone. When groceries are queued for payment, using the mobile wallet will not only find Fedcoin and FacebookCoin, but also AppleCash, ToyotaCash, and the currencies specific to your store. In addition, there is a coin that can be exchanged for babysitting services, and the other one lets you take the local subway. You can choose to pay for a small portion of Apple stock that will be transferred to the grocery store’s wallet as currency.
Duke University’s Harvey said: “In my opinion, in the near future, if there are not even millions of payment methods, there will be tens of thousands. He said that if the Fed can create tokens that represent the United States, then Nothing can stop people from exchanging tokens with whatever they want: “The idea of using US dollars or gold collateral is very common. ”
The “future” in anticipation has already taken place. The trend for blockchain startups is to create services that only use the native cryptocurrency feature, which is designed specifically for applications. Even many companies that are earlier than the blockchain are conducting such research. In January of this year, Kodak released a new coin that can be used to authorize photography.
This kind of token is different from the points system and gift card used by the company for customers for decades. Recording these assets on the blockchain is more convenient and secure.
Harvey said: “You can think of this as an incredibly efficient barter system. Bartering efficiency is usually not high, but if you have a network, mark up currency and services and enable it through the blockchain, it will become very effective.”
Enabling transactions between different digital assets will require the entire innovation ecosystem. For assets that rely on independent blockchains, they need a relatively reliable method to transfer tokens on one blockchain, and at the same time, another token move elsewhere. Third parties need to quickly match buyers and sellers. For example, if your grocery store does not accept Apple stock, you need to find a middleman to provide acceptable coins to the grocery store.
“Without the internet, you want to sell four goats. You have to find the trading object yourself. It’s very difficult. But through the network and the blockchain-based token mortgage, everything becomes much easier,” Harvey said. “We haven’t done this in the world, but this is our goal in the future.”
Losing uniqueness, what else can Bitcoin do?
In these circumstances, what else does the original Bitcoin have? Perhaps one of the biggest technical advantages Bitcoin enthusiasts calls it: Bitcoin transactions are anonymous and cannot be reviewed. These advantages disappear when the transaction is transmitted to the Fed, Facebook, or the broker network that coordinates the sale of barter assets.
There is no real name stored in the Bitcoin blockchain, but it records every transaction you generate, and each time you use the currency, you can expose information about the operations associated with the identity. According to Edward Snowden’s leaked documents, the US National Security Agency is already looking for ways to relate the activities in the Bitcoin blockchain to individuals in the real world. In order to collect all the data that may link the address to the name and real identity, the US National Security Agency has been eavesdropping on fiber optic cables, monitoring Internet activity, and tempted people to enter the compromised platform by making false promises and claiming to protect their privacy.
If the government tries to create and enforce blacklists, they will find that the power to decide which transactions to take is in the hands of several bitcoin miners. The Chinese government previously imposed a travel ban. Although it is not clear whether there are any specific requirements, some key personnel have already felt the pressure.
The early adopters of Bitcoin have been sticking to the dream of a single world currency. This currency is private and can be freely provided to the general public and controlled by the general public. However, 7 billion people who have not yet used Bitcoin may not care about this. Through the Internet, convenience is achieved, all based on scale. This is also why you choose Facebook over other social media sites – because other sites are much the same. If the cryptocurrency is widely used, it is out of the consumer’s spending habits, not the desire of the early adopters of Bitcoin, which determines the vision of Satoshi Nakamoto.