Saturday, November 27

Competition between private cryptocurrencies, the heritage of Bitcoin


In 2018, Facebook, together with other large companies, announced that it was working on its own cryptocurrency, Libra — today called Diem —. Shortly thereafter, the American government placed barriers to prevent its launch.

Other companies, such as Telegram, have also tried to follow this path with the TON (Telegram Open Network) cryptocurrency. However, they had a similar end, the abandonment of the project due to regulation.

Still, other companies managed to create their own money. The Binance Coin, although it is a decentralized cryptocurrency, is a good example of this, it can be considered as a company currency.

A world full of private coins

The Bitcointalk altcoin tab — the largest forum on bitcoin and other cryptocurrencies — already has nearly 40,000 cryptocurrency ads and 10,000 tokens. The list starts with Namecoin in 2011 and today it’s full of memecoins, the fad of the moment.

The reasons for each of them exist are varied, some create coins in honor of their children, others make monetary proposals such as burning tokens, halvings, backing up other assets, and even different use cases, some playing paper money and others going further, acting as shares of a company.

Going further, as cryptocurrencies are mostly tied to a blockchain, several projects are identical in terms of money, but they have several differences in terms of their functioning, security, interoperability and speed. Money is no longer just a currency.

The fact is that as chaotic as this market is, the wide choice is great for its growth. It is the emergence of competition in a sector that was previously monopolized by the state.

Competition between corporate currencies

As mentioned above, while many companies like Facebook and Telegram have not even managed to release their coins, other projects simply bypass the government by using gray areas of legislation and many have so far succeeded.

These pseudo-decentralized cryptocurrencies, with a CEO behind them, might well be considered corporate currencies. Binance Coin (BNB) by Binance, Ripple (XRP) by Ripple Labs, and even Ethereum (ETH) with the Ethereum Foundation fit this definition, largely because of their pre-mining that allocates a certain percentage of the coins to their teams .

Again, there’s nothing wrong with that. Who decides if they survive is the market itself, free to make its own choices.

“I want to conclude this post by wishing luck to all those who seek decentralization, balance and equality in the world. You are fighting the right battle. This battle may well be the most important battle of our generation. We hope you succeed where we fail.”, he said Pavel Durov, founder of Telegram, on TON’s cryptocurrency ban

It is necessary to understand their differences

Facebook’s project, now Meta, intended its cryptocurrency Pound to be backed by a basket of currencies — USD, EUR, JPY, GBP and SGD — which only lose their purchasing power over time. By comparison, other similar currencies, such as Tether (USDT) which is backed in USD, have been in the market for six years even with little transparency.

There are also coins backed in gold, for those who like “sound money”. Despite this, the risks of all these corporate currencies are the most varied, ranging from fractional reserve – when there is a promise of backing –, project abandonment by developers, and even closure of activities by governments, due to a central point of failure.

Finally, even Ethereum, which houses a huge interoperable monetary universe of tokens and use cases, can’t get Bitcoin off its 12-year-old throne. The reason is simple, in addition to being the oldest cryptocurrency, Bitcoin is also the most desired form of money because of its robust and untouchable monetary model, as well as its immunity to governments, both as a currency and as a payment system.





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