Gu Yanxi: Looking at the development of cryptocurrency from the British Industrial Revolution

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The development of blockchain and cryptocurrency is just like sugar during the British Industrial Revolution, through innovative models to allow ordinary users to obtain financial services that were previously unavailable.

Original title: “Sugar and Encrypted Digital Currency”
Written by: Gu Yanxi, founder of the American Liyan Consulting Company, a researcher and practitioner in the blockchain and encrypted digital asset industry

I recently read an article on the Internet, which is very interesting. This article analyzes the impact of sugar on the development of the British Industrial Revolution. Before the rise of the British Empire, the Spanish Empire dominated the world. The Spanish empire plundered gold and silver on a global scale to strengthen its dominant position on a global scale. Gold and silver were considered the most valuable items at the time, so holding more gold and silver was a natural choice at that time. At that time, sugar had just begun to appear, and the ordinary people in Britain had a huge demand for sugar. In order to meet such market demands, various developments in the British market have driven its development in the industrial revolution.

“British society has an obsession with sugar from top to bottom. This hobby is considered by the Spaniards to be a depraved and addictive. Therefore, the Spaniards did not care about the overseas expansion of the British cane sugar industry. The Spaniards continued to devote themselves to the search for the colony. Gold, silver and precious metals, and even Spain’s domestic inflation due to the excessive inflow of gold is not hesitating. At the same time when the Spanish were addicted to gold, the British’s love for sugar made them chase larger plantations and more efficient rolling. Sugar machines, safer maritime transportation, broader cane sugar consumption market, and more convenient cane sugar distribution channels. This has promoted the British industrial revolution, infrastructure and naval construction. In the final analysis, more people need to be liberated and the bottom people Becoming a sugar consumer makes all this profitable.”

If we compare this history with today’s encrypted digital currency, we can easily conclude that the development of blockchain and encrypted digital currency is just like sugar at the beginning, bringing the existing global market foundation to To fundamentally change. Such a change is at the same time promoting more assets to achieve better circulation, allowing more transaction models in the market, bringing more innovations in organizational mechanisms and incentive mechanisms, and allowing ordinary users to obtain financial services that were previously unavailable. .

Current financial, economic and social activities are all based on a centralized computing system, and bookkeeping is done electronically. Transactions in the market are also booked electronically and then completed through currency transfers. Blockchain technology is a distributed accounting technology. On the basis of its support, a distributed method can be used to record the assets in the entity; currency can also be used in the way of encrypted digital currency for circulation; transactions can be used for trading and settlement Way to complete. As costs are reduced, more assets can begin to circulate. All these features are superior to the existing centralized accounting system. At present, various innovations based on blockchain technology are still under development. For example, the recently very hot DeFi is a case of this innovation. In terms of organizational mechanisms and incentive mechanisms, very promising improvements are also being made.

Innovation in the field of encrypted digital currency is still ongoing. At present, there have been attempts to gradually apply these innovations to the field of physical assets. In the previous few years, the application of blockchain technology in this area was mainly to change the existing process with the purpose of improving efficiency and reducing costs. For example, settlement between institutions and settlement after securities transactions. These applications are carried out within the existing framework and have not fundamentally changed the existing business processes. But some recent applications have begun to bring fundamental changes to the existing market structure. For example, in terms of digital currency, the original digital currency (such as PAX and USDC) was designed based on a single legal currency. But Libra’s initial attempt was to build a digital stable currency that was benchmarked against a basket of fiat currencies. This will bring about fundamental changes to the existing currency market. Although the Libra Association was under pressure, it later changed to issue digital stablecoins based on a single legal currency. But the market has seen the changes that technological innovation can bring to the existing currency market.

For example, in terms of tradable assets, the current main trading product is the company’s equity, and the transaction is carried out in a centralized exchange by matching transactions. Innovation based on blockchain technology can allow more assets to be traded and circulated in the secondary market. Such asset types do not have to reach a certain scale like equity in order to be made into standard small units for trading and circulation. Both individual assets and small-scale assets can be traded and circulated in the secondary market based on the support of blockchain technology. Individual assets such as the ownership of artwork and the ownership of a building. Small-scale assets, such as the partial ownership of a real estate, or the right to use certain commodities. Such asset types also include private equity before the company goes public. Moreover, the transaction method does not require centralized matching transactions, and transactions can be completed directly between users. Such applications will bring fundamental changes to the existing financial markets and securities markets.

In this regard, I think Switzerland is in the forefront of other countries. The Swiss Digital Asset Exchange is building a new digital financial ecosystem on top of the financial market infrastructure based on distributed accounting technology. It supports the generation, confirmation, trading and settlement of new types of digital assets. It also uses digital currency to trade digital assets. The members of this exchange will provide innovative types of digital assets for trading on this exchange. Since this exchange is based on distributed accounting technology, many innovative applications can be applied on it, such as DeFi. And such applications are completed under the premise of meeting Swiss financial supervision, so the development of such applications will have a solid technical foundation and legal protection. The ambition of the Swiss Digital Asset Exchange is also on a global scale, because they can provide services on a global scale based on the same financial market infrastructure. Such a development trend is very similar to the rise of Britain during the Industrial Revolution.