html Just passed in mid-June, two news about cryptocurrency were like two bombs igniting online: on the 18th, Facebook released a white paper on cryptocurrency projects called "Libra", which attracted global attention; on the 22nd, the price of Bitcoin, which had been "lurking" under 10,000 US dollars for 15 months, once again exceeded 10,000 US dollars, reaching a maximum of 11,168 US dollars.
On June 18, Facebook officially released its official website of cryptocurrency "Libra" (Libra) and released Libra
On June 22, the price of Bitcoin exceeded US$10,000, the first time in 15 months
0 On the surface, the rise in Bitcoin price seems to be related to Facebook's announcement of the cryptocurrency project Libra. In fact, Libra is just a catalyst for the rise in Bitcoin prices. Factors such as increasing expectations of Fed interest rate cuts and rising capital markets have also played a role in fueling the fire. Even if there is only a catalytic reaction and both digital cryptocurrencies, the relationship between Bitcoin and Libra seems to have been destined long ago. So, what is the relationship between Bitcoin and Libra? What impact will each have? Below, the author compares these two currencies so that readers can have a clearer understanding.
Price: Volatile VS Stable
As a risk asset, the biggest feature of Bitcoin is its price fluctuations. At the beginning of 2017, the price of Bitcoin was less than $1,000, but by the end of the year it had approached $20,000. In 2018, the price of Bitcoin fell all the way, and at the lowest point was less than $4,000, and now it has exceeded $10,000 again.
is significantly different from Bitcoin’s price fluctuations. One of the characteristics of Libra is its stable price, so Libra is also called a stablecoin. The main reason why Libra's price is stable is that it has a value basis as a general equivalent. According to the Libra white paper, Libra can only purchase Libra through fiat currency 1:1, and fiat will also be transferred to reserve funds. The size of the reserve determines the actual value of Libra, which may fluctuate, but is very small.
Value: Investment type VS Practical type
At least so far, the greatest value of Bitcoin is still as an investment product. Bitcoin needs a lot of exposure to attract attention. In this way, it can attract funds and provide support for its price increase. In fact, some time ago, Bitcoin investor Justin Sun announced that he would buy the Warren Buffett 20th anniversary charity luncheon for more than 45 million US dollars, so it cannot be ruled out that the suspicion of advertising for Bitcoin. You should know that Buffett is not a supporter of Bitcoin. He even told the media before this year's shareholders' meeting that Bitcoin is a "gambling device" that does not produce anything substantial, and its limited use is even related to fraudulent activities.
Unlike Bitcoin, Libra basically does not have the possibility of speculation, because Facebook has put a lot of effort into technology and regulation, and it is difficult for ordinary investors to find opportunities to make money. In addition, Libra's coin rights are currently mainly concentrated in Facebook. Ordinary investors cannot control Libra's market liquidity and naturally have no way to affect its price. So, where is the value of Libra mainly reflected? In addition to the currency value connected to fiat currency, Libra's greatest practical value is payment. According to Facebook CEO 4 Zuckerberg 's vision, in the future, you can pay the bill with one click, scan the QR code to buy coffee, or you can take local public transportation without carrying cash or subway cards. Although these seem to have been realized in China where mobile payments are developed and popular, don’t forget that the basis of their vision is the encryption digital currency . Facebook’s ambition is to create a simple and borderless currency that can provide billions of people around the world with a convenient payment method and smart contract platform while avoiding various remittance defects.
architecture: Virtualization VS Paravirtualization
Bitcoin is a P2P virtualized encrypted digital currency that does not rely on specific currency institutions to issue. Anyone can generate it through a large number of calculations based on the specific algorithm . Bitcoin’s decentralized features and algorithms can ensure that the currency value cannot be manipulated by large quantities of Bitcoin, while cryptography-based designs can make Bitcoin only transfer or payable by real owners.In addition, Bitcoin limited the total number at the beginning of its design, which is extremely scarce.
is completely based on algorithms, unlike Bitcoin, Libra has a clear issuing agency, and the number and frequency of issuances can be manipulated and intervened. Additionally, like Bitcoin, Libra retains the principle of decentralization of cryptocurrencies, but it is completely powered by real asset reserves. The white paper reveals that for each newly created Libra cryptocurrency, there are a basket of bank deposits and short-term government bonds of corresponding value in the Libra reserves to build trust in its intrinsic value.
Audience: Currency Circle VS Global
Bitcoin certainly has the advantages of anonymity, duty-free, borderless, and supervision-free, but it also has defects such as fragile trading platforms and long trading hours. Based on this, its practical application prospects are not optimistic, which directly leads to its audience mainly speculators who aim to make money. Although the release of
Libra will still be until 2020, the fact that Facebook is driven by it is enough to show that its market position is global. You should know that Facebook currently has up to 2.4 billion monthly active users around the world, which is an advantage that no technology company has. In fact, the white paper released by Facebook has already clearly portrayed Libra's future audience. According to the white paper, Libra runs on Libra Blockchain and aims to be the infrastructure of global finance that can be expanded to billions of accounts and support high transaction throughput. In other words, the capacity of this blockchain is enough to support the transaction volume of billions of people around the world. However, according to Libra's white paper, Libra Association (Libra's organizational management issuer) will give priority to tokens to association members, encouraging members to use Libra first in their ecosystem for payments. Founding members also need to work hard to innovate in technology so that Libra can be used at a large scale.
backing: Retail investors VS giant
Bitcoin has become popular mainly because of the underlying blockchain technology it relies on. Compared with the doubts faced by Bitcoin, the application prospects of blockchain have been recognized by many experts and scholars. In addition, the biggest backing of Bitcoin is the crazy investors behind it. Some of these investors are out of trust in blockchain technology, while others are simply speculators, so it is difficult to form a stable alliance. Although Bitcoin has been regarded as a legal currency by countries such as Germany and Japan, and is also regarded as one of the options for transactions by well-known companies such as , Microsoft, , and Dell, this does not mean that Bitcoin has obtained credit endorsement from these governments and enterprises. If one day, Bitcoin crashes, the retail investors who own it will still suffer the losses, rather than governments or businesses that use it as a tool.
is different from Bitcoin’s secret origin. Libra was born with a golden spoon in his mouth and had a wealthy family gene. It not only has Facebook as its backing, but also has a "blood relationship" with Internet giants such as Uber, eBay, VISA and veteran financial institutions - the latter is a member of the Libra Association with Facebook. Although the Bank of England, France and Germany said it would regulate Facebook cryptocurrencies for privacy and financial security reasons, Federal Reserve Chairman Powell was optimistic about this, pointing out that digital currencies represented by Libra may replace traditional currencies. It can be seen that behind Libra is not only a giant, but also a shadow of the government.
Prospect: Financial bubble? VS Financial Revolution?
Since the day Bitcoin entered the public eye, there have been endless bubbles surrounding it, including world-class economists and entrepreneurs. So, is Bitcoin a bubble? What is the difficulty of this problem? In fact, Forbes made a public judgment as early as 2017, believing that Bitcoin’s price growth “corresponds to most of the elements that make up the bubble” and that it will eventually collapse. If facts are the criteria for proving the test of truth, then at least from the moment, Forbes' judgment is wrong. Just early this morning, the price of Bitcoin rose strongly on the basis of the $10,000 mark, forcing $14,000. However, this growth trend itself is highly consistent with the trajectory of bubble formation, so using it to negate Bitcoin's bubble attributes is no different from being self-contradictory.In the short term, the high returns of Bitcoin investment are obvious, but its high risks are still different undervalued. Therefore, rationality is crucial for investors.
Since Facebook announced Libra, all kinds of speculations surrounding this cryptocurrency have attracted thoughts, such as whether it will take over the international currency status of the US dollar, penetrate the global economy and control the financial lifeline, and enable the United States to continue to enjoy the super dividends of international currency hegemony? If so, Facebook will not be just a social platform, but more like a "world central bank" that transcends national borders. It is not clear about Facebook's government background for launching Libra, but today, with the spread of technology wars, no technology cannot become a weapon, and finance is more like a powerful heavy cannon. Of course, these are all speculations, and it is not ruled out that Facebook, as it said in its white paper, is eager to break the existing financial landscape and solve practical problems for consumers around the world. If this is true, Libra's value will be subversive and will inevitably set off a revolution in the financial field.
