British Economist: The Problem and Solution to Bitcoin's "Digital Gold" Effect

Bank of England CFO Peter Zimmerman posted an article on the value of Bitcoin and other cryptocurrencies, outlining the benefits of Bitcoin's digital gold, the problems it faces and its solutions. .

Recipe

Bank of England financial adviser Peter Zimmerman has released a working statement on the value of Bitcoin.

He announced that the value of Bitcoin would be in trouble. The limitations of blockchain technology have created a stigma between users of Bitcoin as a cryptocurrency and its users on the basis of price speculation.

He said this would lead to further price increases and force traders to hold Bitcoin like gold.

Bitcoin's "digital gold" effect

In his statement, Zimmerman mentioned the properties of Bitcoin that make people think it is gold.

“When the price of cryptocurrency rises, holders will be reluctant to use it as currency. Instead, they like to hold and spend longer and slower. I call it 'digital gold.' Yes, holders see it as an asset worth more than the money it spends. "

He was not the first to have had the idea. New York Times reporter Nathaniel Popper once used the term to describe his knowledge of the history of Bitcoin. Nick Szabo, who is said to be the founder of Bitcoin, has already led a similar debate, clearly seeing BitGold due to its shortcomings.

Bitcoin involved

What is "catch 22"?

Catch 22 is set during World War II, which describes the events that took place in the US Air Force wing on an island in the Mediterranean Sea called Pianoza.

According to the Catch-22 theory, only lunatics can get a theft exemption, but they must apply for it themselves. But when you apply it only proves that you are an ordinary person and that you are still damaged. Chapter 22 shows that the driver can return to China after 25 trips. However, the law further specifies that the decision must be made on the basis of the facts. Otherwise, you will return to your country of origin. Therefore, the president can keep increasing the pilot's flight and not be disobedient. Again, not the least.

Zimmerman thinks Bitcoin is the problem. This is an inevitable problem and any way to go can lead to negative results.It introduces two concepts of Bitcoin. The value of Bitcoin depends on its use as a payment method and the limited space for blockchain transactions.

Zimmerman also pointed out that the real reason Bitcoin fell into Catch 22 was that as demand increased, it became more difficult for Bitcoin to comply with payments.As traders flock to push Bitcoin prices to new highs, the blockchain becomes increasingly crowded and difficult to pay, reducing its position and value.

Speculative work makes blockchain untenable, reducing cryptocurrency finances and also affecting prices, he said. This reflects the new relationship between speculation and the market using cryptocurrencies.An increase in the demand for capital can reduce the value of real estate rather than increasing it, as expected by industry standards.

It is not difficult to understand how this idea came about. In late 2017, when the price of Bitcoin skyrocketed to $ 20,000, the blockchain became crowded, trading intensified, and prices rose. The developers have come up with technologies designed to enable Bitcoin to move into growth applications (Segregate Evidence), but that also has its limitations.

Description of the high volatility of Bitcoin

Zimmerman concludes:The Bitcoin dispute could lead to the biggest change in Bitcoin prices.

As the price of Bitcoin rises, its value as a means of payment decreases, resulting in a drop in the price. When prices go down, Bitcoin performs better, which gives more reason for the price to come back.

The obvious problem is that the problem is exacerbated when the transaction is not liquid. According to the Bitwise report, 95% of Bitcoin transaction volume is counterfeit.As the cryptocurrency market is characterized by an inability to manage the market spread over many illegal exchanges, these advantages may further explain why the exchange rate fluctuates.

Bitcoin solution to the problem

Economists have a solution here.

According to Zimmerman,Other projections outside of the future blockchain could reduce volatility costs and increase spending.Recent developments such as the financial solutions business or the introduction of the Lightning Network will have a significant impact.

Major exchanges, including the Chicago Mercantile Exchange (CME) and the Intercontinental Exchange (ICE), have used bitcoin-cash futures trading, allowing futures traders to trade futures bets on the price without holding bitcoin. . The Lightning Network is a solution that allows Bitcoin to carry out Bitcoin transactions on a daily basis without slowing down the network.

However, it is recognized that Bitcoin still needs a market share from large blockchains, with or without these upgrades.