| Bitcoin Derivatives Other decentralized cryptocurrency blockchain solutions are derivatives of Bitcoin. They use the Bitcoin open source code to create a blockchain that differs from Bitcoin under their own uniquely defined protocol. Privacy, contract creation, or a marketing ploy may differentiate a decentralized derivative of Bitcoin. For the reasons I explain in Free Banking and Cryptocurrency, the crypto space will eventually devolve toward a cryptocurrency of the most stable value that can compete with the fiat dollar. Currencies like Libra and other central bank crypto efforts are merely digital fiats. Not decentralized, they are issued and controlled by a central bureaucratic authority similar to any central bank. They depend on fiat as their underlying support value. Tokens The third derivative of Bitcoin is tokens. Initial coin offerings, ICOs, govern token creation and they are the least respectable of Bitcoin derivatives. Many ICOs were outright scams that piggybacked on the initial crypto speculative mania and lost their value very quickly. The SEC has been late to the token game but has now issued regulation that defines a token as a utility or a security that has to comply with the same SEC regulation required for any financial instrument issued as an investment vehicle. Other tokens are designated as utility tokens and offer the purchaser a future in whatever the issuer promises to create. All tokens are built upon the underlying value of the cryptocurrency that supports them — mostly Ethereum — and are dependent on Ethereum's success and stability of value for their own success. Ethereum is unable to scale and is rewriting its code and protocol to transition from a proof of work (PoW) system like Bitcoin to proof of stake (PoS). At some point, Ethereum will reinvent itself as Ethereum 2.0. State of Cryptocurrency The cryptocurrency blockchain space continues to evolve. Wright's BSV has unlimited scaling, accommodates micropayments, and promises to achieve transaction throughput comparable to the leading credit card companies. The cryptocurrency blockchain vision is for a new internet architecture, defined in George Gilder's Life After Google. Gilder's vision foresees an internet defined by heterarchy rather than hierarchy. An internet architecture that democratizes money, revolutionizes the financial system and opens the world to a new era of unimaginable innovation based on security, privacy, and the individual at the center of the system rather than a few massive corporations. The current reality is a constantly increasing list of speculative assets that are designed to increase exponentially in value while their functional, underlying utility remains elusive. That model cannot prevail. When I first looked at Bitcoin in 2016, it was immediately obvious to me that bitcoin couldn't work as a transactional currency. "The bitcoin flaw." George called it in his book. No currency has ever existed in fixed supply. An extremely primitive example is the Rai Stone on the Micronesian island of Yap. Vitalik Buterin has cited the Rai Stone as an example of a historical currency and ledger that provides a premise for cryptocurrency and the blockchain. But this is silly. A cryptocurrency has to act like any other currency throughout history. There has never been a fixed supply currency adopted by any expanding monetary system. The addition of 'crypto' to currency combined with digital cryptography does not magically overthrow thousands of years of monetary history. The same rule holds true for fiat currency. The massive increase in computational power that tenuously holds together the global fiat financial system will not add permanence to fiat currency. Fiat has no set value against a monetary standard of reference. All fiat systems eventually fail via their inherent proclivity for devaluation. One can make the case that Bitcoin initially required a fixed supply to demonstrate its efficacy. Bitcoin started from nothing and was a revolutionary technology understood by only a few specialized technologists. By limiting the supply of bitcoin, future demand would increase its value commensurately. Oddly, however, it was Ross Ulbricht's Silk Road illegal drug marketplace that proved bitcoin's efficacy as a currency. Silk Road demonstrated that the Bitcoin protocol worked as an un-hackable ledger and that its currency could obtain value, which led to eventual wider adoption by the general public. For his illegal marketplace demonstration of bitcoin's currency efficacy, Ross Ulbricht will spend the rest of his life in prison. However, the fixed supply template of crypto that was successful in demonstrating Bitcoin's efficacy by creating value for bitcoin will naturally have to evolve into a functioning currency that expands in supply to meet demand relative to a standard of reference. This is the only way that cryptocurrency and the blockchain can achieve widespread adoption and fulfill its promise. –Mike Kendall, The Man on the Margin
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George Gilder
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