From the Perspective of Application, What is the Value Behind Cryptocurrency
At the end of 2020, Bitcoin exceeded 28,000 USD. According to a report by Coindesk, Bitcoin’s market value exceeds 500 billion USD, and its asset ranking has reached the top 10 in the world. This record-breaking price is generally considered to be driven by the entry of many institutional investors. Also, because of the serious impact of the epidemic, a large number of printed US dollars and more economic stimulus may become a catalyst for inflation. In addition, some large companies start to support Bitcoin. For example, Paypal announced that accounts in North America can directly purchase Bitcoin and other popular cryptocurrencies on the platform.
Compared with other groups or companies, most cryptocurrencies do not have a centralized operation team, nor are they supported by products or laws. For most people, cryptocurrency is a financial system composed of a bunch of codes. Where does its value come from?
As a reward for content creators
Review the development of cryptocurrency, from the minor, simple, community-driven Bitcoin to today’s abundant DeFi projects and smart contracts. The problems and difficulties over the past decade have been resolved by more and more technical methods. The mysterious cryptocurrency in the past is moving into the public lives. Take the community platform as an example. Steemit uses its own token STEEM to reward outstanding authors. Another Chinese platform, Matters, uses Likecoin as a token. Every registered user can like his or her favorite articles, and the author can also be rewarded for it. By means of tokens, a positive communication between readers and authors is established, which helps to improve the quality of content and also activates the community. Such a model may give future creators and platforms a new path. Artists, designers, photographers, painters, etc. can directly communicate with fans by using cryptocurrency technology.
Benefits people in need
The underprivileged minority may also benefit from the cryptocurrencies. In some poor regions or countries, there is no need to spend a high cost of time and money to set up local foundations or intermediaries. Anyone or any group can initiate a project to receive donations from all over the world. In the form of cryptocurrency, donors can track the flow of their funds. At the same time, it eliminates the cost of physical construction and expands the transparency of charities, enabling those in need to really get help.
The application of stablecoins is also worth discussing. In daily life, we are used to paying fiat currency for all transactions. The stability of fiat currency comes from the government’s confidence and credit. However, in some cases, the monetary policy of the government and the central bank may cause serious inflation. When a national fiat currency is worthless, the encrypted stablecoins that bypass bank supervision may be able to help local people. From the example of severe inflation in Venezuela, a stablecoin — USDC allows local personnel, such as medical staff assisting in epidemic prevention, to receive USDC through crypto wallets and transfer them to local accounts based on exchange rates. In this case, cryptocurrency might be used as a more dependable store of value and medium of exchange in the future.
What is next
The decentralization, immutability, and traceability of cryptocurrency greatly reduces the complexity and intermediate costs of transactions, and directly impacts people’s lives. But also because of these features, some new issues have arisen. For example, how to prevent fraud and illegal transactions? Whether the stablecoins undermines the traditional market model of another country by cutting ? When cryptocurrency gradually attracts public focus, continuous governance and supervision in the future is a necessary process. There will be more challenges and cooperation with the current centralized system. As Ethereum founder Vitalik mentioned in his 2020 review,
Things happen for strange and inscrutable reasons, and there are always surprises. The question that remains is how do we adapt to it?
Back to the beginning, what is the value of cryptocurrency? There is a familiar saying in the crypto world: Value comes from consensus. Technically, that is true. In addition to the consensus basis on blockchain technology, I think there is another part of the consensus which comes from the influence on people’s lives. From the view of products, in this Internet era, a service, a piece of code, an ingenuity, or a design often has great value not because it is tangible or not, but how many problems it solves and improves people’s life. I believe in the future, cryptocurrency is still waiting to be more widely used in our lives.
