Today, many feel that in our world (and in the world of money including) “something is wrong …”, but they cannot understand: what exactly is the reason and where are we going? Let’s try to clarify the situation, briefly looking at the history of mankind, money and cryptocurrency.
Cryptocurrency predictions: evolution of people and money
Appearing at the dawn of mankind as a medium of exchange, money changed along with people, serving the growing needs of enlarging communities. Groups were united into tribes, then into settlements, later into cities and finally into states. In the course of their growth, communities became increasingly strong and competitive, and interactions within them, including economic ones, began to acquire ever larger scales, diversity and significance.
At each new stage in the development of civilization, money also evolved – they became more and more functional, changing to growing needs and solving additional tasks more and more efficiently. Money has become the main tool in such important processes as trade, savings, lending, investment, taxation, regulation, etc. The currencies issued by states have also become a key mechanism of control and management both within countries and internationally.
To understand the current situation, it is important to realize that human evolution has been going on for millions of years in the midst of a fierce struggle for limited resources, during which individuals and communities that have most successfully taken resources from nature and from competitors have won. War did not shut up on the planet for a minute. In obedience to primitive instincts in defending the interests of their groups, people have traditionally caused damage to competitive communities, with the majority sacrificing their personal interests for the sake of the survival of the group as a whole.
Over the past decades, the technological level of mankind has grown many times over, but people themselves are not able to change just as quickly. Religions and states succeed in correcting to some extent the inherited “wild” behavior of the population, which makes it possible to build larger, creative and effective communities. But to talk about significant progress in this area, unfortunately, is still premature. Rapid change of external attributes (spears thrown away, put on ties, etc.) does not block, but only covers the deepest instincts that served as the basis for survival for thousands of years.
Next big cryptocurrency
As a result, we have a picture of glaring inefficiency on a global scale, when internal contradictions increasingly hinder (rather than contribute to) further development. At the same time, a significant part of the total potential is spent not on creation, but on the destructive confrontation of people and groups, who traditionally seek to win the evolutionary race at the expense of their neighbors. In ancient times, this behavior helped people to survive and improve in conditions of small competing societies, but today it also prevents us from joining efforts in the format of a single global community.
Is it possible to eradicate this primitive instinct of destruction (in the context of globalization – self-destruction) and move on to the next stage of development? This problem needs to be solved as soon as possible in order not to die in the fire of more and more destructive means of opposition. It is necessary to build new collective security systems in all key areas (including the world of finance) using modern tools that emerge as a result of technological progress. The results of the implementation of the Internet and the effective interaction technologies based on it demonstrate the enormous potential of this area.
It is impossible to predict the future, but it is obvious that money should, as always, have time to change after all other changes. The aging payment systems always lost their role, and they were replaced by new ones that could solve the whole range of urgent tasks. It is already difficult to ignore the apparent discrepancy between the current financial system and the direction and dynamics of overall development. If in areas such as healthcare, crime control, arms control, etc. Because nations manage to jointly develop new decentralized collective security mechanisms, then its users are not allowed to participate in changing the existing financial system.
Why is this? Let’s go back to the story. In the twentieth century, the world of money has undergone more significant changes than in the entire previous period. For centuries, silver and gold have played the role of a generally accepted monetary equivalent, but the physical limitations of their large-scale use made it difficult to service a growing economy. In addition, the authorities have always been interested in replacing difficultly controlled gold money with a variety of paper substitutes. The unrestricted issue of “paper money” and the possibility of manipulating the precious metals market made it possible to deprive gold of its monetary functions in favor of the so-called fiat currencies, “secured” only declaratively.
Permissiveness resulting from the concentration of power among issuers of key fiat currencies has generated a number of negative processes – interest rate games, credit adventures, exchange frauds, currency wars, real wars, etc., subjecting world finances ) the interests of the “new elite”. Today, the global financial system has largely transformed into a global system of resource weaning from neighbors around the world, under which many “vassal states” are poorer and lose the remnants of their independence. All this leaves no hope that the financial elite acting in their own interests is interested in improvements and is able to solve the problems created by it.
In fact, the whole world is being offered, like the clients of a single bank, to remain passive users and rely on the conscience of those in whose hands power has been concentrated. Such a hierarchical imbalance cannot last forever, and sooner than later it will lead to the migration of users to alternative decentralized financial interaction tools that can honestly observe the interests of the majority of system participants. And the longer this problem remains unresolved, the more painful will be the inevitable transition to a new monetary system of the next generation capable of solving all the accumulated problems. However, it is not known when and how exactly this will happen.
But there is good news – technological, software and cryptographic innovations of recent years have allowed enthusiasts to develop their own models of payment systems. Programmers have combined efforts to create cryptocurrency – alternative non-state currencies with their own monetary unit, emissions, infrastructure, etc. Even at the “infant” stage, cryptocurrencies have managed to prove their viability in practice – thousands of people and organizations around the world are already using these technologies, and market capitalization is consistently maintained at several billion dollars. Along with the Internet, cryptocurrencies are part of a general trend to free and unite people in a single community.
The emergence of cryptocurrency: Bitcoin
In 2008, the first cryptocurrency, Bitcoin, began to develop. The concept of a decentralized payment network proposed by him is so different from the old solutions that its improvement and unfolding of potential will take some more time. Similarly, they adapted to mass use and all other innovations, such as electricity, cars, airplanes, mobile communications, the Internet, etc. The main value of cryptocurrency is that they provide another degree of freedom – the freedom of personal finances. The wide spread of this technology will lead to a series of significant changes in many areas.
Omitting technical details, Bitcoin can be described as an electronic payment system that uses its own currency with limited emissions (the model of diminishing production, like that of gold) and operates through its protected decentralized network. The Bitcoin network automatically verifies transactions, while security and reliability are ensured by the use of cryptography and modern information technology. Before the advent of Bitcoin, the work of all payment systems was based on the authority of the central trusted authority (bank, payment service, etc.), opening an account for clients and certifying all their operations. Thus, in the banking system, transactions are executed when they are confirmed, secured and executed by banks. At the same time, users are completely dependent on both the banks themselves and all the higher organizations. Money in the banking system can be tracked, blocked, withdrawn, eroded by inflation, etc.
The situation is different with Bitcoin. Its technology allowed refusing transaction assurances by intermediaries – all transfers are decentralized checked and certified by the Bitcoin network itself, which operates distributed, like torrent networks. The Bitcoin system does not belong to anyone, its users are equal, and the program code is open and publicly accessible, which guarantees independence, fairness and security. To create an account and start using Bitcoin, users do not have to disclose their identity and get someone else’s permission – just connect to the Internet and install a wallet program. In this case, all transactions are carried out directly, and therefore can’t be blocked, etc. There are opportunities to exchange Bitcoins for national currencies, as well as direct payment in stores.
Bitcoin independence excludes external influence on the network and is the basis of its key advantages over the banking system. The emission schedule of new Bitcoins is algorithmically fixed for decades to come, excluding the uncontrolled inflation characteristic of fiat currencies. The absence of intermediaries means zero or meager transaction fees, and the continuous operation of the network guarantees users automatic transfer of any amounts from anywhere in the world to anywhere within 10 minutes – without intermediaries, restrictions and risks. Recently it has been difficult to even imagine, but now it has become a real opportunity for everyone who has access to the Internet.
However, even in the ingenious concept of Bitcoin, over time, limitations and shortcomings are revealed. This is normal, because it is impossible to create an ideal stable system from the first attempt. The developers have already eliminated many of the problems of Bitcoin, and some of the shortcomings have been corrected by connecting to the system of third-party elements and services (at the same time it took a few steps away from the principles of decentralization and independence that underlie success). But there are still such limitations, which are either difficult to overcome or only possible due to various “tricks” that do not correct, but cover the fundamental shortcomings of the system.
So, the downside of high reliability and stability of Bitcoin is the low adaptability of its architecture, which imposes restrictions on the further development of the project. Over the past years, the Bitcoin network has improved mainly only the basic functionality, and most of the new features have been added through the launch of external centralized add-ons. But despite all the conceptual limitations, today Bitcoin reliably functions, is widely known and remains the most popular and demanded cryptocurrency.
Some enthusiastic developers, inspired by the success of Bitcoin, did not limit themselves to the narrow framework of its architecture, but launched alternative cryptocurrencies with modified parameters and principles of operation. But it soon became clear that it was impossible to gain popularity only due to the “cosmetic” improvements in the Bitcoin source code – it is necessary to offer users the fundamentally better solutions. Out of several hundreds of alternative projects, only a few have everything necessary for long-term development and success in the “great cryptocurrency evolution”. Among them, the project “Dash”, which started in early 2014, is particularly noteworthy.
The developers of Dash have taken the Bitcoin code as a basis and are developing their “ideal cryptocurrency” – “Digital Cash”. First of all, the concept has been improved. For the stable functioning and development of any cryptocurrency, the coordinated work of many interconnected systems and processes is required: maintaining the network infrastructure, providing computing power, financing the development, promoting the project, etc. Effective self-regulation is necessary, because problems with any of the key processes inhibit and jeopardize the entire project. The Bitcoin model is too simplified and provides for the promotion of only those members of the network who provide cryptographic protection (the so-called “miners”). At the same time, the remaining components of Bitcoin remain without system support and function arbitrarily. The improved Dash concept incorporates decentralized mechanisms for encouraging and auto-tuning all important elements, which improves the stability and survival of the project as a whole.
Then, the technology itself was improved. The basis of all the key advantages of Dash is the two-tier architecture of its distributed network. The traditional single-tier Bitcoin network is able to perform only the simplest slow operations – consensus is reached every 10 minutes and the verified transactions are recorded in a distributed register of operations. Two-tier Dash network works differently – secure network nodes can reach consensus continuously, in real time. This allows you to implement (without violating the principle of decentralization) high-speed protocols, which opens up new opportunities that are unattainable for ordinary cryptocurrencies.
On the basis of this platform, such demanded processes as Anonymization of funds (third-party observers cannot track transactions, balances and payment history of users), High-speed transactions (full confirmation of transfers within 5 seconds, like bank cards), Voting (decentralized development management and project financing). In the future, the capabilities of a two-tier Dash network can be used to implement solutions such as distributed storage systems (transaction lists, registries, messages, etc.), distributed application systems (exchanges, shops, services, etc.), support for Third Parties projects, etc.