We recently reported on the first hearing of the German Bundestag on “digital currencies”.We asked questions of the invited experts on this subject.In this article, the expert Ralph Bärligea.Mr Bärligea, how do you assess the current situation with regard to cryptocurrency in general? Is this a topic that revolutionizes the world of finance, or rather a hot air?
If money is only hot air, crypto – currencies are hotter than hot.
For Blockchain, technology, based on cryptocurrencies, is a novelty in the history of information technology, which in particular opens doors to the financial system.Blockchain technology, with its three features of concatenation, distribution and data encryption, can both ensure the inviolability and transferability of data around the world and in real time.Until now, one or the other was possible.
Even the Romans were able to transmit news on the light signals along the border towers of the Limes at a speed of about 270 kilometers per day.It was relatively fast, but not so sure.
If a border tower was hostile, false signals could easily be transmitted.Today, we would say “Fake News”.The mounted messenger with an imperially sealed letter took longer, but the information was less likely to be manipulated.Texts carved in stone were even safer in the center of Rome.But this information was not really transferable and liquid.There was a classic compromise between forgery security and transferability of information.
Blockchain technology does not need a central instance
Today, we also transmit digital data via light signals, including fiber optic cable and the speed of light in real time.
However, even before Blockchain uses Bitcoin as its first use case in 2009, these data were still very vulnerable to manipulation, copying, modification, and disfigurement of all kinds, which has now changed with blockchain technology.In addition, there is no need for a central authority to exploit this technology, but it can be used collectively, collectively or as a consortium.As for gold, the money supply of crypto-currencies can not be manipulated arbitrarily.And as for the possession of physical gold, there is no solvency or insolvency risk compared to a bank as a central instance.
But unlike gold, crypto-currencies can be stored and transferred as easily, or even more easily, than the money in the current bank book.The money of the book that we call familiarly also corresponds to the balance of our account.The other conditions relate to demand deposits or funds.
Because crypto-currencies, whether privately produced or not, can combine the benefits of gold and fiat money without having their respective disadvantages, they represent a real monetary revolution.
The Federal Association of German Banks, in its recent statement for the Digital Strategy Committee in the Bundestag, for example, stated the following: “Cryptographic-based digital currency is the first true innovation in monetary affairs since the invention of paper money.” Bitcoin is known to be the most widely used cryptographic currency.What is your opinion about Bitcoin?
Coins represent about two-thirds of the market capitalization of all crypto-currencies, according to Coinmarketcap.com.The work validation process with relatively high energy consumption in Bitcoin can be obsolete and brutal.
There are now less expensive methods, such as implant evidence or IOTA’s Tangle Method, that can offer similar, if not better, safety at lower electrical costs.But even for Bitcoins, there are now cheap transfer options via the Lightning network.I do not deliberately explain the different methods, because it would be an arrogance to try to imagine several thousand crypto-currencies, each with a different mode of operation, which is the best.In the end, I think the best money will emerge in the market process.
Anyone who believes in cryptocurrency and therefore necessarily wants to be the owner of the cryptocurrency must invest the maximum amount of his assets for which he can assume a total risk of loss, and then similar to an Exchange Traded Fund (ETF), dispersed by market capitalization.Concretely implemented, this is relatively easy.Who owns the three largest cryptocurrencies, Bitcoin, Ethereum and Ripple, already covers 80% of the market capitalization of the crypts market and is in line with Pareto’s portfolio 80-20-Faustregelt – technically considered already quite good.Anyone who appreciates his assets here differently from the market dares to know better than the average of all others.I do not rely on cryptocurrency because of their diversity, their still very high volatility and their technical and economic complexity.
Anyway, nobody should put everything on a map and not everything on Bitcoin.
In practice, Bitcoin is still not used.In terms of global financial wealth, according to the Allianz Global Wealth Report, it represents, along with all other crypto-currencies, less than one-thousandth of the world’s financial assets.Money is a network commodity, that is, its value depends on the number of people who use it, especially the number of points of acceptance.So there are traders where you can pay with this money.
Bitcoin has already proven itself as a purely digital value store, as a means of transaction and as a computational unit in the world of pure cryptographic exchanges and markets.
Here he is a giant.In the world of daily payments, from the supermarket to the purchase of real estate, he is a dwarf.
The question of whether it will make it a generally accepted means of payment is pure speculation, but it is not excluded either.Although, technically, Bitcoin is not the most sophisticated cryptocurrency solution, it could continue to be the most prevalent player in the cryptography market via tools such as the Lightning network or via forks such as Bitcoin Cash, simply because it is already widespread and concerns network effects.and a large user base arrives.
This could look like the so-called video war of the ’70s and’ 80s, in which the HSV was not necessarily the best quality and the cheapest format, but prevailed from the beginning of a widely used format .But if big players like Facebook’s Libra, which could reach a third of the world’s population in one, would use its 4.1 billion Facebook users, or if e-Euro discussed in circles policies, could do so quickly through a wider user base and better regulatory integration.gain more acceptance and thus “dig” wild crypto-currencies like Bitcoin water, so that they continue to lead a niche existence, eventually to total loss of value.It remains exciting.
In addition to Bitcoin, there is the category “stable parts” in which Libra also wants to play.
How would you rate the current and future regulatory situation of these new “commercial” crypto-currencies? Will we all soon pay with Stablecoins instead of credit cards?
Stablecoins, which are denominated in existing government currencies, do not really differ in terms of commercial management from the bankroll or a money market fund.If the Stablecoin is a debt on the euro, for example, but is not fully covered by the euro, but for example on at least one percent of the pre-determined reserve requirement ratio currently in force of the European Central Bank, it then appears to be a bankroll.If these Stablecoins are 100% hedged by government currencies, it would be like a money market fund, such as an exchange-traded fund (ETF), so liquid that it is not only traded daily, but also used daily for payment.
Currently, it seems that Libra is conceived in this way, even if its white paper does not say it clearly and that the public and politics still ask many questions.Whether it’s a bank or a money market fund, there is already regulation for both.
As blockchain support is now new, the regulation wheel does not have to be completely reinvented, but if necessary refined at one time or another.
In addition, stable currencies are possible, which are covered by intelligent cryptocurrency via other cryptocurrencies or when an algorithm tries to keep the market price stable by tightening and broadening the money supply.
compared to a reference value similar to the policy of a central bank.In my opinion, such variants are, especially if they operate autonomously, understand the regulations as pure crypto-currencies analogous to Bitcoin and Ethereum and treat them accordingly.
It is very likely that we will receive euros or dollars in the form of a bankroll or Stablecoin that can be financed for the payment of a blockchain solution.
There is no logical reason for sovereign currencies to avoid the benefits of blockchain technology, namely better portability and security against tampering, including the ability to automatically conform to compliance from the design stage, and easily leave the field to the competitors.Overall, it’s a very positive development.Because when everyone strives for better funds and payment methods, citizens, entrepreneurs, and consumers, who are money users, will benefit from greater value stability, lower costs, and more money.cheaper transaction and many other interesting functions of money.The same development as analog phone phones to smartphones is also possible today for cash and payment systems.
The second part of our interview will follow shortly.
Ralph Bärligea is an expert in the German Bundestag on “digital currencies”.
He is also a senior consultant in strategy and digital at BearingPoint, a management and technology consulting firm, where he advises banks and the public sector primarily on financial issues, digitization and blockchain.
Graduated in economics, specialized in computer science, he is also a university lecturer and author specializing in the fields of economics, blockchain and cryptocurrencies.Related.
