Crypto market is under the pressure: fees are speeding up and Finland has a personal vendetta against crypto
The Bank of Finland explains why the concept of a digital currency is a ‘fallacy’, Ethereum faces another network overload, affecting exchange withdrawals and Syscoin hack disrupts Binance prompting temporary shutdown.
Bank of Finland bashes crypto, calling it ‘an accounting system for non-existent assets’
In the report blockchain is described as the centralized ledger with multiple copies that are scattered across the network. The author of the report also expresses the opinion that the only reason for buying crypto is for criminal activities, and it’s useless for a bank to issue a cryptocurrency as it would be a centralized database.
A very interesting opinion, however sadly it doesn’t have any grain of logic. We don’t get why it looks like the Bank of Finland has a personal vendetta against crypto, but it’s a sure bet that Aleksi Grim, who wrote this report, isn’t as excited about cryptocurrencies as the rest of the world. But let’s see what are his arguments. He writes that blockchain is a record keeping system. That’s true. But there’s a slight and important nuance. It’s decentralized and it has strict rules on how the blocks can be created. And that’s very important, considering that we talk about money. Aleksi points out that crypto doesn’t have the properties that real currencies have. We suggest that that properties are related somehow to the governmental ability to print it out of thin air. That’s the only difference now.
Crypto can be mined, fiat money can be printed. Someone could argue, what about governments backing currencies with their funds, with economy? We should remind that gold standard was abandoned in 20th century by many countries, for example, it was abandoned in US to cover the losses from the Wall Street Crash of 1929, and the printed money helped to overcome the Great Depression. Now the money is being printed endlessly, there is no rule regulating the printing rate. Of course, the Central Bank can set a certain target for inflation. But there’s no backing for any of these currencies. It’s just a common trust. How is it different from cryptocurrencies? Now the trust is lost, because you can’t just be trusted forever, you should earn it, or lose it. This printed money doesn’t create any additional value, it just reduces the value of already circulating currencies. Now society thinks that this magic internet money has some real value, it can be used as a unit of exchange or as a store of value (although it’s very volatile, we must admit), even when bankers tell the society not to use it.
Can fiat money be considered real when an incompetent government prints it endlessly, just because it can, creating hyperinflation? Can Bitcoin be regarded as a fallacy? If you answered positively twice, then you should know that people of Venezuela won’t agree with you. They use Bitcoin in daily life instead of bolivar.
All things have value because it’s a common agreement, and the fact that some banker told you to believe that his money should be highly valued only because he printed it doesn’t mean you should, if you don’t trust him. It’s strange that such an educated man as Aleksi Grim should be doesn’t understand that. Or maybe he does?
In the end, let’s think about how should we call a centralized database with identical entries stored on multiple independent nodes with equal permissions, where the exclusion of any node doesn’t influence the integrity of the network? Oh yes, we call it DEcentralized, that’s right.
Ethereum Network was congested again due to high fees
The fees skyrocketed because of a new exchange FCoin that decided to implement a new voting system. To vote for a new token to be listed, users must send these tokens to an exchange, which resulted in enormous rise of a GAS price. Many small projects tried to win in this competition, thus heavily clogging the network in the process.
It’s widely known that Ethereum network doesn’t require much to be completely clogged up. A pair of cute kitties, one little poll, or just a bunch of transactions during a hyped ICO is enough to create big problems for everyone in the whole network.
How can Ethereum become a foundation for decentralized economy if it can’t handle even the standard amount of transactions during its daily use? It’s not being used for commerce nor it has any working popular DAPPs, but that’s the question of priorities. You can’t have many users before you build a fast network, and that’s what the people like Vitalik Buterin and Vlad Zamfir are working on.
Is it bad that Ethereum is so slow? Sometimes it can be hard to make a transaction, but in the end that’s the thing that shows the popularity of the project. Sure, Ethereum could have implemented a dPoS system to scale like many other blockchains, sacrificing decentralization of the network, like EOS, Lisk or NEO. But the development team chose not to do it, and we see that dPoS systems aren’t that good as it was assumed before.
Eventually, scaling solutions will be developed and Ethereum will be upgraded, with PoS, sharding and Plasma. It doesn’t really matter for the end user, as he shouldn’t care if his application is decentralized or not, he cares only about its functionality. But for those companies who could be interested in using blockchain, it makes a big deal. There’s little to no incentive to use centralized blockchains, like EOS, where a few selected entities can control everything.
If you want to depend on someone, it would be better to use Amazon Cloud Database, it’s really fast, it’s even faster than the fastest blockchains and it’s pretty secure. But those who seek decentralization, will look for truly uncontrollable blockchains, and then Ethereum could outperform all these fast dPoS networks, being as fast as they are now, but also much more secure.
Binance was forced to halt all trading activities due to a hack of Syscoin’s total supply
The amount of 1 billion new Syscoins was generated out of thin air and sent to Binance, where it was sold. The price of SYS climbed to 96 BTC per one coin. Then all BTC were withdrawn, thus making it necessary to shut down all operations and to reset all API keys. Now the exchange has resumed its activities.
Not a first time when Binance messed up with API keys and stopped the trading. Since January we have a non-stopping sequence of hacks and security breaches on exchanges. Binance, Kraken, Bitfinex, Bithumb. The problem is that unlike any stock exchange, crypto exchange is an open system. Once a token or a coin was added, it can be traded, deposited or withdrawn without any restrictions. If a coin’s total supply is hacked, all new generated coins can be sold on any exchange.
That trick doesn’t apply to stocks exchanges, as the stocks can’t be generated out of nothing, all free float that is being traded can’t be deposited or withdrawn without broker, who checks everything beforehand, as any broker can’t risk with his license by trying to cheat. The problem with crypto exchanges has two solutions. First one, is the path of Coinbase. Regulate everything, impose strict rules, choose a few reliable cryptocurrencies to be traded, double check everything, and it could help you evade these problems, attracting big institutional investors at the same time. The other way is to use decentralized exchanges. It can reduce the risk of hacking or a downtime/halting, but still doesn’t solve the problem of messing with total supply. But the solution in this case could be simple. Maybe we should not trade shady coins?
