Centralized Institutions Won't Die, but Blockchain Makes the "Least Bad Form" of Business
Updated: Sep 16, 2018
Crypto Asia 100 Vol.7
Why won't cryptocurrency supersede money any time soon? Who should make the rules in a decentralized world? Star Xu, CEO of OKCoin, shares his take on the basic questions regarding a "blockchainized" future.
Bitcoin is just another social game on the Internet
BIANCA: Some people argue bitcoin is a store of value, like gold. Others say it has no intrinsic value. How would you define the nature of bitcoin?
STAR: It is meaningless to say whether bitcoin has value or not. You have to ask the question, "to whom?" I think bitcoin is a type of credit for a specific group of people.
Since I belong to that group. I consider bitcoin as a store of value on the Internet, just like gold. The way it's mined and the way it operates actually uses many features of gold as a reference.
For instance, it has a finite supply; there is not a single entity to control its production and circulation; you can divide it into infinitesimally small portions; you can make peer-to-peer transactions with it.
But to say it's a currency would be a wild exaggeration. I think at this point, bitcoin will not become a currency, and it will not threaten fiat money. Let's say a video game issues a game token, and the players have accepted its value. To them, the token is valuable. Bitcoin is just another social game on the Internet and this group of people, myself included, are its players. So we accept its value.
You can agree with our valuation, or you may think it valueless. But here is the thing. No one in the world can fake a bitcoin. Bitcoin is a type of credit. It has a set of rules that has been running on the Internet for nine years, and the same set of rules is carried out meticulously without error across its users in 100 plus countries around the world. And it is open for anyone to verify. That's why more and more people are accepting it as a valid credit system.
The current blockchain network is bound to be much more secure than any centralized data system of today
BIANCA: How do you feel about the security issues haunting the industry?
STAR: The security of digital assets on blockchain comes down to three levels. When people argue whether bitcoin or other cryptocurrencies are safe or not, it only makes sense putting it into context; that is, which of the three levels we are talking about.
Level one is the security of the network. Since bitcoin and Ethereum are decentralized, there are many nodes on the Internet, probably with hundreds of thousands of backups. In this sense, the current blockchain network is bound to be much more secure than any centralized data system of today.
Level two is about the consumers. It includes keeping your password safe from being stolen when you use bitcoin. At such a level, the crypto system as a whole is not very developed, unlike banking, when you have mobile verification likeUKey, and so on. There is a lot of room for improvement.
The third is enterprise-level security as service providers. It has to do with technology as well as the management of individual providers.
Crypto exchanges are in fact the most transparent market in human history
BIANCA: Would you feel threatened if some day NASDAQ or NYSE entered the business and tried to compete with you?
STAR: I have nothing but respect for such potential competitors. On the one hand, we borrowed a lot of designs from NASDAQ and NYSE, such as risk control. They will push us to a higher standard. On the other hand, crypto exchanges are, in fact, the most transparent market in human history. Ethereum is traded on 7,000 exchanges worldwide simultaneously. The difficulty of manipulating crypto prices, at least for mainstream assets, is actually much higher than that of today's stocks in NYSE and NASDAQ.
BIANCA: How about smaller tokens?
STAR: They may be less liquid and may only trade on one or two platforms. Then the transactions might be less transparent, and manipulations are more likely. But such degree of manipulation exists in traditional stock trades, too.
In the traditional exchange market, the big players get to make the rules. I believe there may be giants meeting, there will be laws. But I believe the ultimate rule-maker in the blockchain will be technology. I believe that one day it will develop its own auditing system, its own financial system, and so on.
When I think about the next ten or twenty years, I don't see centralized exchanges dying. They will exist. Crypto exchanges have their problems. However, until we come up with a better idea, decentralized exchanges are the least evil form of business.
Young people will have digital wallets of Amazon Coin, Facebook Coin, or Uber Coin
BIANCA: What's your opinion about altcoins?
STAR: Personally speaking, I don't support most of the altcoins. They are like a Pandora's box. If your coin isn't built on significant innovations, or hasn't solved fundamental problems or is unable to move the industry in a new direction, I would take you as a fraud.
That being said, I would predict for the next decade or two, enterprise-level tokens will be robust, especially in the US. Maybe young people will have digital wallets of Amazon Coin, Facebook Coin, or Uber Coin. Those cryptocurrencies will become the future of the industry.