"Let's ban private Cryptos. But, let us still harness the underlying tech behind Cryptos".
"For this we will launch a government backed digital currency".
This argument is idiotic in epic proportions and here is why 👇👇
1/On any blockchain (eg. Bitcoin, Ethereum) there is a verification mechanism.
This verification mechanism ensures that the blockchain data that is being put up on the network is error free.
For example, Bitcoin uses something called as Proof of Work consensus mechanism.
2/How does this verification happen?
It happens when Bitcoin Miners verify transactions by using computing power, using machines like these:
3/ Now, this costs a lot of money and electricity. So why would they mine?
Because Bitcoin network rewards them for their work i.e when PoW (proof of work) is verified, miners get a reward from the Bitcoin network in form of Bitcoin/fraction of a Bitcoin.
4/ Why 'Bitcoin' as a reward works for Miners?
Because the supply of Bitcoin is capped to 21Mn.
The money supply by the government (USD, INR, or Government's Digital Money) is theoretically infinite.
This is how the US government has spiked up the money supply:
5/ In simple terms: the more the government prints, more the existing money gets useless.
'Cash is trash': If the government decides to print 1Tr$ more tomorrow, the value of your existing money goes down.
This is precisely the reason why Bitcoin transpired in the first place
6/ Therefore, miners on the blockchain would not abandon a system like Bitcoin to go with the 'digital' version of government's absurdity.
So good luck harnessing the true power of blockchain on a government backed digital asset.
Ethereum, I will cover on the next thread.
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