[Column] Cryptographic Assets Based on Decentralized Distributed Ledger Technology

Now we are clearly in two circumstances. The first is a structural long-term recession, and the second is an era of asset bubbles.

Structural long-term stagnation refers to a structured and protracted trend of continuous erosion of the global economy after the global financial crisis of 2008-2009. Economists explain this in economic terms, such as declining labor productivity and lack of effective demand. As an analyst who has experienced the real economy and financial markets since 2006, I express a structural long-term recession as a constant economic crisis.

An asset bubble is a phenomenon that occurs as a shadow of a structural long-term recession. After the decision was made to bankrupt Lehman Brothers, an American investment bank, one of the major disasters in September 2008, the asset bubble started in earnest and is still ongoing.

Interest rates, which are formed by mixing economic growth rates, inflation, and risk premiums, were induced and traded as low as possible during the period. Central banks have provided abundant liquidity so that securities (such as bonds and stocks) can be traded in financial markets at the lowest interest rates possible. Prior to the 2008-2009 global financial crisis, liquidity was usually supplied indirectly, but over the past decade, central banks have become commonplace to directly purchase assets to provide liquidity.

Not only the bond market, but also the global stock market and housing market are enjoying a stable and long-term boom that is unprecedented in history. And with the unprecedented pandemic of the Corona 19 epidemic in 2020, a structural long-term recession and an asset bubble intensified at the same time, and now we are at the extreme of a recession and bubble.

And virtual assets also jumped on this trend. Virtual assets such as Bitcoin, Ethereum, and Dogecoin, which are playful, but with serious intentions and ambitious aspirations, so sometimes seem dangerous, started in October 2008 and started at zero, and as of June 2021, the amount of virtual assets Its total market capitalization has grown to $2 trillion. Since it has grown from zero to $2 trillion in a short period of about 10 years, it is clear that virtual assets are the subject and phenomenon of a representative asset bubble.

However, the vision and functions of Bitcoin and Ethereum are specific and clear. Anonymous Satoshi Nakamoto, who proposed Bitcoin and spearheaded the initial project, wanted to build “a new electronic currency system that operates completely one-to-one between parties, with no need for any trusted third-party intermediaries.”

Vitalik Buterin, who proposed Ethereum and led the project so far, said, “It can support any kind of decentralized service (currency transaction system, smart contract, shareholder register, voting system, DApps, DACs, DAOs), If developers think the market is necessary and allow them to configure interfaces, the solution he came up with is a completely redesigned, decentralized, decentralized blockchain that functions as an open platform on which all forms of contracts and decentralized applications can be installed.” wanted to build.

Although it is pointed out that the cost of verification, consensus, and propagation of the blockchain state change is too high for the Bitcoin Satoshi Nakamoto wanted to build, while the efficiency is low, the goal and function he proposed was clearly achieved. And strong supporters and communities for the Bitcoin blockchain persist. Ethereum, which Vitalik Buterin intends to build, updates essential functions for decentralized systems such as smart contracts, oracles, zero-knowledge proof, sharding, two-layer system, and distributed proof-of-stake. It creates a model and ecosystem for investment and forms a strong community with voluntary supporters based on it.

We live in an era of structural long-term recession and asset bubble, and we need a solution. In the traditional way, such as households, corporations, banks, central banks, governments, and international organizations, structural long-term recessions and asset bubbles circulate inevitably and recursively cause a decline in the trust of members and concern about sustainability. have. It is acknowledged that Bitcoin, Ethereum, and Dogecoin also contain contradictions in traditional methods. Ultimately, competition and coexistence between systems will be sought in a world where there is no permanent winner. Among them, however, there is a sufficient possibility that cryptographic assets, which contain the differences between the decentralized distributed ledger and encrypted technology, will evolve into ‘sustainable and trusted virtual assets’.