The form of money: from physical currency to cryptocurrency

With the rise of computers, the Internet and the blockchain, many new currency forms have emerged, such as electronic money, digital currency, virtual currency, cryptocurrency, cryptocurrency, decentralized currency, tokens, certificates, and stable currencies. , pyramid money, and so on. What currency patterns do these new currency concepts refer to? What is the relationship between each other? The existing classification of monetary forms fails to give a clear definition, and these concepts cause some misunderstandings and even confusion in the application. Especially in the recent blockchain boom, cryptocurrencies, certificates, tokens, and stable coins outside the French currency have emerged rapidly, forming a global market with low publishing threshold, strong liquidity, and difficulty in supervision. The concept is unclear and cognizant. Unclear brings huge financial risks. Some MLM organizations and funds use this situation, through the decentralization of the cryptocurrency and the government's support for the blockchain, exaggerating the security and application prospects of cryptocurrency, vouchers and tokens, bringing investors huge loss. To this end, this article will sort out and define the various forms of money in order to eliminate the confusion of various currency concepts.

The definition of the concept of money in this paper will be based on three principles: (1) the characteristics of the currency match the meaning of the word. Try to select the words that best reflect the characteristics of specific currency forms for definition; (2) The relationship between monetary forms is clear and complete. Clarify currency differences, clear conceptual boundaries and be as complete as possible; (3) respect the concept of fact acceptance. Whenever possible, adopt concepts that have been widely accepted by the market.

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1. The function, nature and form of money

To analyze the current concept of monetary form, we need to briefly examine the function and nature of money. It is generally believed that money has three main functions: (1) trading medium (or means of circulation, payment medium). Acting as a medium for the sale of goods; (2) a measure of value (or unit of account, unit of valuation). The scale or unit of pricing or bookkeeping of goods; (3) value storage. A means of storing wealth or purchasing power. ^[4]42,[2]122

So what is the nature or essence of money? Raising this question is actually focusing on the transaction medium, the pricing unit and the value storage. Which is the most basic function of the currency, and other functions are derived from this function. If you lose this function, you cannot call it "currency". To answer this question, it is easy to reach a consensus that the value storage function of money is a derivative function, and money can be used as a transaction medium and a pricing unit, so that it can have the function of storing value outside the exchange activity. If something does not have the function of exchange medium and pricing unit, it can also have the function of value storage, but this is the ordinary stored value goods or assets, not the currency.

In the two functions of the transaction medium and the pricing unit, the transaction medium is generally considered to be the basic function, that is, the basic nature of the currency is the transaction medium. Since the currency acts as the transaction medium, it has the function of pricing and storing the value of the commodity. Adam Smith ^[1]20 began to derive money from the barter exchange because it appeared as a medium of exchange. Menger ^{[5] 221} discusses in more detail the process of money from commodity exchange and its evolution in various countries. He particularly emphasizes: "The function of value scale and value storage is nothing but accidental. They are not included in the concept of money.” ^{[5] 240} Mishkin ^{[4] 42} also believes that “in the three functions, the trading medium is able to add money to other forms of assets such as stocks, bonds and houses. Distinguish the function."

However, there is also strong support for the value scale as the nature of money. Keynes ^{[3] 5} believes that the calculation of currency (that is, the currency used to represent debt, prices, and general purchasing power) is “character and nominal,” and the so-called currency is simply “the physical representation of this representation.” Marx also believes that "the first function of gold is to provide material for the value of the commodity world", and secondly is the means of circulation. "The commodity that acts as a measure of value and thus performs its function by itself or through representation as a means of circulation is money. ^{[2] 112} David Graber believes that it is wrong to use the trading medium as the most important function of the currency. ^{[6] 22} He believes that the currency is not produced by barter, and that people exchange money and loans before they start to exchange. In lending activities, money first has the function of a value scale. ^{[6] 33} Homer and Siller also believe that “it is possible to borrow to trigger the development of the original measurement and currency standard.” ^{[7] 4}

Whether the essence of money is a trading medium or a value scale, both tendencies have realistic examples, but there is still insufficient historical evidence to give a decision. This article temporarily puts aside the essential differences of money and focuses on the form of money. This paper accepts these two basic monetary functions, and thus can get our two most basic forms of money: physical currency and bookkeeping currency.

Second, the physical currency and the bookkeeping currency

The widely accepted early monetary form is the physical currency as a medium of exchange. Different physical objects in different regions and different eras bear the medium of exchange. As a physical currency, early is a commodity that can be bought and sold and has some non-monetary use value. Therefore, it is also called "commodity money", but the later banknotes only bear the monetary function and no longer have other use value. It is hard to call it a commodity again, but it is still a "physical currency." Therefore, the physical currency covers the commodity currency, and the commodity currency is the early form of the physical currency.

Smith ^[1]21 refers to ancient Greek cattle, Abyssinian salt, Indian shells, Virginia tobacco, Newfoundland dried fish, sugar from the West Indian colonies, animal skins in some countries, and even He also used the nails of a village in Scotland, and so on, which were used as physical currency. Homer and Siller ^{[7] 71} talk about the classification of physical currency, there are roughly 173 kinds, the most common are: beads, cattle, cloth, copper, gold, grain, iron, rice, salt, shells, silver, beasts Leather, slaves and tobacco. So far, the cattle and sheep in the underdeveloped animal husbandry areas of China and the wheat or rice in the grain producing areas still have certain monetary functions.

The main characteristics of the early physical currency are scarcity, and people are generally used to accept, such physical objects as an exchange medium, such as cattle and sheep, wheat and so on. However, such items are often difficult to store, transport, cut, inspect, etc., causing inconvenience in exchange. Therefore, with the development of transaction size, frequency and depth, the specific form of physical currency has also evolved. Under the two basic premise of (1) scarcity and (2) certain use value, the main direction is: 3) Easy to store, (4) easy to carry and transport, (5) easy to split, (6) easy to measure, (7) easy to develop direction. In this direction, the precious metals and gold are gradually unified, and finally the coins that are uniformly weighed, labeled, and certified by the authority (generally the highest political power) are formed. In the 7th century BC, the Lydians began to use official coins, ^{[7] 18} until now the coins are still in circulation.

A major shift in physical currency comes from non-convertible banknotes. Before coinage, the value of physical money comes mainly from some use value brought by its natural attributes, and partly from the use value that is easy to exchange. ^[8] The appearance of the coin makes it more valuable than the precious metal of the same weight, such as a silver coin with a face value of 1 pound, which can contain only 0.9 pounds of silver. This premium comes mainly from the founder's credit as an authority. The nature of "credit" is not natural, but social, and comes from social relations. When it comes to non-convertible banknotes, although its natural attributes are easy to exchange, its use value is almost gone, and its value is almost entirely authoritative. [2]

At this time, the banknote does not become a currency because it is a "commodity", but it becomes a "physical currency" from a virtually worthless physical object because of its social property representing authority. At this time, it is somewhat reluctant to call it "commodity currency." Therefore, we refer to banknotes, coins, and early physical currency as “physical currency” rather than “commodity currency”. In the exchange, the ownership of the physical currency is transferred, as opposed to the transfer of ownership of the commodity. Therefore, the physical currency is a currency that has a natural physical form and is paid in kind.

Bookkeeping currency has long been concealed by physical currency in mainstream economics. To this end, David Graber did not hesitate to criticize the logic of the economics from the barter exchange currency since Smith, and thought that this was a complete fallacy. He believes that the reason for the currency is not the exchange of goods, but the credit between people, that is, "debt." ^[6]24 As early as 3,000 years before the BC, the ancient literature of Sumer recorded the activities of people borrowing food and metals. ^{[6] 39, [7] 3} The quantity of goods and metals in the credit record is only a number rather than a physical object. According to this, Graber believes that the first thing that appears is the “virtual currency” in credit, and then the coinage appears. ^[6]40

Keynes's "Monetary Theory" begins by defining "computing currency is a currency that represents debt, price, and general purchasing power. This currency is the original concept in monetary theory." He emphasized that "currency itself is a debt contract that can be paid after delivery." The thing of the price contract is also the form of storing general purchasing power. Its nature is derived from its relationship with the calculation of money.” ^{[3] 5} The “calculated currency” here is the “booking currency”. Keynes also promoted the general currency from the bookkeeping currency and emphasized that it represents the role of debt.

The early scene of the emergence of bookkeeping currency was that the temple with a lot of wealth provided credit to people and became a bookkeeper. With the development of commerce, financial practitioners specializing in credit, such as the Babylonian Bank of China in 600 BC. ^{[7] 13} The basic characteristic of bookkeeping currency is that some people use digital to record the attribution and transfer of money.

The early bookkeeping currency has two characteristics: (1) as mentioned above, it is inseparable from “credit” and “lending”, and (2) it is closely related to the physical currency in actual economic activities: on the one hand, the book currency is used. The unit is often the quantity unit of the physical object as currency, such as the already 5,000-year-old weight unit shekel becomes a commonly used unit of measurement for silver and silver coins, and is used for bookkeeping; ^{[10] 9} In the case of lending activities, physical currency is often used as a means of delivery. Therefore, in the long history, the bookkeeping currency mainly exists in credit activities and is closely related to the physical currency, rather than the commonly used and independent means of payment. Therefore, the bookkeeping currency is concealed in the history of the physical currency.

With the advent of the modern banking system, especially credit card payment methods have emerged in the West, and online payment methods such as Alipay and WeChat payment have been rapidly popularized in China. The final physical currency form – banknotes (cash) The scope and scale of use are rapidly shrinking. Modern bookkeeping currency has become the main means of payment for the social economy. As the “cashless society” process accelerates globally, bookkeeping currencies are moving away and quickly replacing physical currencies. In fact, the more new forms of money discussed below are the evolutionary forms of bookkeeping currencies.

At this point, we can clearly define the physical currency and the bookkeeping currency:

The physical currency is a currency that has a natural physical form and is paid in kind.

The bookkeeping currency is the currency in which people determine ownership and transfer by digital recording.

Third, electronic money and digital currency

The accounting currency is the currency that determines the attribution and transfer by means of digital recording. The evolution of the recording mode is the evolution of its form, which is simply the evolution of the “book”. This evolution is consistent with the evolution of human information carriers. For example, Mesopotamia (3500 BC to 800 BC) is a mud carrier ^{[6] 208} , ancient Greek stone monument ^{[6] 212} , ancient Chinese bamboo slips, etc. are also the carrier of the bookkeeping currency. . With the advent of papermaking, bookkeeping currencies generally use paper-based books.

The emergence of computers is a revolutionary change in the recording and dissemination of human information. It has also caused a fundamental change in the form of bookkeeping currency. The physical books have been replaced by electronic books, and bookkeeping currencies have entered the era of electronic money.

The era of electronic money first appeared as the electronicization of the bank's accounting system. In 1958, the first electronic computer was used for savings in Bank of America, and in the 1960s, ATMs began to replace the cashier business ^[11] . Further, electronic communication began to be used for inter-bank fund transfer and settlement. Founded in 1973, the Global Interbank Financial Telecommunication Association (SWIFT) became the world's largest interbank electronic settlement network.

As one of the global financial centers, Hong Kong used the electronic financial service system or “automatic teller machine” for end users in the 1980s. Users holding plastic cards (bank cards, credit cards) do not need to go to the bank in person, they can be in the electronics. The transfer business is completed on a computer system. This new currency form is called "electronic money." ^[12] Electronic money payments save 1/3 to 1/2 of transaction costs compared to traditional payments. ^[13] In 1993, Japanese electronic money payments accounted for 78% of daily payments, while Switzerland reached 97%. ^[14]

In the broadest sense, the monetary system that is separated from the physical books and recorded and transferred through electronic information can be called “electronic money”. But the aforementioned "electronic money" specifically refers to the early form of generalized electronic money: the financial and financial services provided by banks through computer and electronic transmission technology. These include automatic ticket processing systems, electronic funds transfer settlement systems, automated credit card payment systems (ATM), automated shopping payment systems (POS), telephone banking, and home banking systems. ^[15] The main body of this electronic money system is closed in the banking system. The emergence of the Internet has pushed electronic money forward a big step forward.

The emergence of the Internet is another information technology revolution after the computer, which also brings about innovation in the form of bookkeeping currency. In the 1990s, the Internet began to be rapidly commercialized. In October 1994, the Stanford Federal Credit Union (Stanford FCU) became the first financial institution to offer online banking services on the Internet. ^[16] Some Internet-based electronic money or digital cash have emerged. For example, Mondex users who were later acquired by MasterCard can transfer money through e-wallets, and Netcash users can transfer money to each other via email. In 1997, the Coca-Cola Company even opened mobile payments for vending machines. ^[17]

The truly popular Internet-based e-money system was established in 1998. It was not only the main payment channel for ebay after being acquired by eBay in 2002, but also became the main payment method for Internet e-commerce in 2012. The payment has reached $14.5 billion. ^[18] China's e-currency started late, and the popularity of credit cards lags far behind the West. However, thanks to the Internet wave, China's Internet e-money application has developed rapidly. In particular, Alibaba, which was established in 1999, was decisive in 2003 when Taobao and Alipay were launched. In 2017, the scale of Internet payment in China has reached 24.54 trillion yuan. ^[19]

Although Internet-based payment systems are still accounting systems that record and transfer money through electronic information, they fall into the category of broad-based electronic money. But with the electronic money recorded and transferred inside the banking system, which has been previously called "electronic money," the Internet payment system is more open. ^{[20] It} is necessary to distinguish between the two forms of money.

After the rise of the Internet, the resulting new economic model was commonly referred to as the “Digital Economy”. The UK issued the Digital Economy Act in November 2009, and the Russian government issued the Digital Economy Plan in 2017. China The "Outline" of the "13th Five-Year Plan" has also made important arrangements for the development of the digital economy. Accordingly, Internet-based electronic money is not commonly referred to as " Internet currency " or " network currency, " but is widely referred to as "Digital Currency," including Mondex, Paypal, and the like. ^{[twenty one]}

Therefore, we define the digital currency as: the currency based on the Internet record attribution and transfer . Before the Internet, the electronic money limited to the banking system was called traditional electronic money. For convenience, it respected the existing usage, referred to as “ electronic money ”, which is the accounting currency for electronically storing and transmitting books and transaction information .

It should be noted that the common form of bookkeeping currency is the number recorded on various media. In the broadest sense, all bookkeeping currencies can be called digital currency. English can use Digital Currency to refer to Internet-based digital currency, while digital currency synonymous with accounting currency is expressed in Numeric Money. To avoid confusion and respect for reality, this paper suggests that “digital currency” refers exclusively to Internet-based electronic money.

Fourth, digital legal currency and virtual currency

The currency pattern after the emergence of the Internet has developed rapidly, and the Internet-based digital currency has many forms. The earliest and currently the most widely used is the circulation of national currency through the Internet. The aforementioned Mondex, Paypal, Alipay, and WeChat payment are all extensions of the French currency on the Internet. Since there has been a form of digital currency that is independent of the legal currency, we refer to such digital currency as “ digital legal currency ” for the sake of distinction.

The so-called digital currency independent of the legal currency means that the subject of issuance and accounting is not the accounting currency of the national monetary authority. According to the different types of issuance and accounting entities, it can be divided into two categories: individual (individual or enterprise) accounting digital currency and public decentralized accounting digital currency.

The rapid expansion of Internet business applications, while stimulating the digitization of legal currency, has also created a demand for the endogenous currency of the Internet business ecology. In 1999, Flooz.com launched a forward-looking currency number flooz dedicated to online shopping, but closed down in 2001 due to lack of market ^[22] . In contrast, the endogenous digital currency generated by real market demand has a stronger vitality. The main resource gold in Warcraft, which emerged in the late 1990s, formed a trading market among game players. The rise of online games has made game cards an important medium for virtual asset trading in the game world, and has formed a game card trading market. After the instant messaging tool QQ was successful, Q coins were issued in the ecosystem, and other large Internet companies also had similar virtual currencies. These game cards and virtual currency mainly flow in their own ecology, but some also extend beyond the ecology, causing the attention of the financial authorities. In 2007, 14 ministries and commissions such as the Chinese Ministry of Culture jointly issued a document prohibiting virtual currency from purchasing physical goods to prevent virtual currency from impacting the French currency. ^{[23], [24]}

Internet commercial transaction media such as Flooz, Warcraft Gold Coin, and Q Coin are in line with our definition of Internet-based accounting currency, but they are fundamentally different from Paypal, Alipay, WeChat payment, online banking, etc. They are not issued by the national monetary authorities. Nor is it collateralized by legal currency or linked to legal currency, but issued and booked by individuals or businesses. Because people are used to refer to new lifestyles such as online shopping, online games, and network communication on the Internet as virtual worlds, such Internet-based illegal currency can be called "Virtual Currency."

The European Central Bank defined virtual currency in 2012 as “an unregulated digital currency that is issued and controlled by developers and used internally by a particular virtual community” ^[25] . In 2014, the European Banking Authority defined virtual currency as “a digital value carrier that is not issued by the central bank or other public authorities, nor is it linked to the legal currency, but is accepted by natural or legal persons as a means of payment and can be circulated, stored and traded.” ^{[ 26]} The definition of virtual currency by the US Treasury's Financial Crimes Enforcement Network (FinCEN) also emphasizes its illegality (Legal Tender). ^[27] China's 14 ministries and commissions "Notice on Further Strengthening the Management of Internet Cafes and Online Games" also explicitly referred to such online trading media as "virtual currency."

In virtual currency, it is necessary to distinguish between two types: ecological circulation and open market circulation. The Q currency was originally issued for ecological use, but once it was beyond the ecological scope, it was returned to the ecological circulation after being banned in 2007. This kind of virtual currency that is circulated in the ecology strictly does not have the nature of universal currency, and it is more suitable to call it "virtual token" . At the beginning of Flooz's design, it was for the open market circulation, but it failed to survive. In fact, privately-issued publicly-distributed currencies on the Internet are subject to policy supervision, business cycles, etc., and it is difficult to survive. Therefore, before the emergence of cryptocurrency, the “virtual currency” we can see is basically “virtual tokens”. ".

Among the various currency concepts, virtual currency has been used the most widely used. It can: 1) Because "virtual" is opposite to "physical" and refers to the "booking currency" that is opposite to the real currency. , 048) 2) because the electronic information is also virtual and refers to the aforementioned "electronic money" ^{[28], [29]} , 3) because the Internet refers to the aforementioned "digital currency", 4) because "cryptocurrency" is also based on The Internet is called virtual currency. ^{[29] – [31] The} misuse of multiple meanings brings a lot of inconvenience.

Based on the above analysis, in order to reduce confusion, we define “ virtual currency ” as the currency that is issued and booked by individuals or organizations outside the government based on the Internet, or simply “ folk digital currency ”. Among them, the virtual currency circulating inside the private issue is called “virtual token” . In order to accurately define the concept, digital currency such as paypal, Alipay, and online banking, which are digitized by legal currency, is called " digital legal currency ."

Five, the birth of password currency

In addition to the rise of the Internet economy, the more important reason for the rise of virtual currency is the reflection on Keynesian policies and the legal currency system. After World War II, countries generally deviated from the gold standard and implemented the national credit support of the legal currency system. In line with Keynesian policies, while preventing economic crisis and deflation, they also brought about persistent inflation and excessive government intervention, which eventually led to “stagflation” and Keynesianism. Micro, liberal currency theory and policy rise.

In response to the series of Keynesian issues, Friedman emphasized the importance of stabilizing the currency, proposed a single currency rule, and stabilized the money supply by increasing the independence of the central bank within the framework of the legal currency. ^[32] Another more radical route is Hayek's “currency non-state”, which is to abandon the legal currency, privately issue credit currency, and form a market-generated monetary system through competition. ^[33]17 This idea lacks feasibility. After all, in most cases, national credit is more reliable than private credit. However, the emergence of asymmetric cryptography has provided a new path for currency de-nationalization – the cryptocurrency.

The asymmetric cryptographic algorithms were independently discovered by James Ellis and Clifford Cocks and Graham in 1972, and by Whitfield Diffie, Marty Hellman, and Ralph Merkle in 1976, respectively, which were published earlier and had greater impact. ^{[34] 141} Asymmetric public and private keys can be used to encrypt and decrypt information without the aid of an intermediary, as well as the signature and verification of messages, which opens up a new paradigm for human social interaction.

Timothy May believes that asymmetric cryptography will fundamentally change the way institutions and governments intervene in economic transactions, as printing has changed medieval European societies, to create an untrackable electronic currency, Crypto Credits. ^{[35] 4} In 1985, David Chaum pointed out in his paper the importance of asymmetric cryptography to free socialization. Soon, he realized that asymmetric ciphers could be used to construct untrackable e-cash. In 1990 he established his own company, DigiCash, to develop the most successful virtual currency on the Internet at the time ^{[36], [37]} .

In 1991, the emergence of the cryptographic technology tool PGP expanded the popularity of cryptography. In 1992, Eric Hughes, Timothy C. May (Tim May) and John Gilmore founded a password private discussion group called Password Punk. In 1993, Eric Hughes published the Cryptography Declaration ^[38] , claiming that password punk is committed to personal privacy in the age of electronic networks. Eric Hughes also wrote a password mailing list program that can communicate anonymously, which became an important platform for later cryptocurrency exploration. In 1993, Bruce Schneier published "Applied Cryptography" and cleverly bypassed the military ban, which made cryptography widely spread and made great contributions to the civilianization of cryptography.

In 1998, password-punk Dai Wei proposed an anonymous, distributed electronic cryptocurrency system, B-money, ^[39] proposed that distributed is an important breakthrough, but the issue of currency is not effectively resolved. Adam Back invented the Hash Cash application workload in 1997 to prove against spam. ^[40] The peer-to-peer network technology implemented by Shawn Fanning and Shawn Parker in Napster in 1999 laid the foundation for decentralized network construction ^[41] . In 2004, Hal Finney improved hash cash to "reusable workload verification." ^[35]8

The above-mentioned monetary systems established by asymmetric cryptography have failed, but the solutions have been continuously proposed and improved in terms of currency confirmation, currency issuance, distribution operation, and verification mechanism. Finally, on November 1, 2008, a person named Nakamoto Satoshi announced in the password punk list that he was working on a peer-to-peer electronic cash system. On January 3, 2009, the system was launched, namely Bitcoin. Currently, the system has been successfully operated for 10 years and has spawned tens of thousands of similar or modified currency systems. These currencies all use asymmetric cryptography, so they are collectively called "Crypto Currency."

In the cryptocurrency system represented by Bitcoin, the core functions of the public and private keys of the asymmetric cipher are: the public key is the public account of the currency owner, and the private key is only owned by the currency owner for signature authorization. Perform currency confirmation and transfer. [3] The current digital legal currency system also uses asymmetric cryptography, which is mainly used to verify the security of transmitted information, but is not used to build an account system, so it should not be called password currency. In addition, it is wrong to use the domestic translation of Crypto Currency as “cryptocurrency”. Although asymmetric ciphers are originally used for encryption and decryption of information, they are only used for cryptographic currency for message (transaction) signatures and verification, not for encryption. ^[42]

In the case of Bitcoin, it is (1) privately distributed, (2) operated by means of a computer, (3) currency circulated by the Internet, and therefore, a type of virtual currency in the digital currency. But in theory, (1) the government can also issue a cryptocurrency to build an account system with public and private keys. (2) Signatures and verifications can also be calculated manually. (3) Circulation can also be achieved by any means of communication such as flying pigeons. Therefore, we can't use the cryptocurrency as a branch of the virtual currency, but the cryptocurrency should be defined as: the accounting currency that determines the currency ownership by asymmetric cryptography. This is the broad "cryptocurrency".

Sixth, the type of password currency

The cryptocurrency is the latest currency form, a product of the development of the market economy and technological progress, but it is also the currency concept that has been most confusing in the near future and has brought serious social harm. It is necessary to carefully clarify the concept, explore its positive significance, and curb relevant financial risks and social hazards.

If we define the cryptocurrency by "confirming currency affiliation with asymmetric cryptography," then bitcoin is just one type of cryptocurrency. In this type of cryptocurrency system, anyone can participate in the issuance and accounting of money (commonly known as "mining"), and almost all links are created by open competition. In addition to bitcoin (BTC), this type of cryptocurrency includes Bitcoin Cash (BCH), Litecoin (LTC) and the like. Their basic characteristics are: high decentralization through distributed consensus. This kind of cryptocurrency based on "Asymmetric Password + Distributed Consensus" (Cryptographic Consensus Mechanism) ^{[43] is} called " Password Consensus Currency ". Since Bitcoin succeeded in bringing money into the era of cryptocurrency, it is customary to refer to "password currency" or "cryptocurrency" as the " password consensus currency ", which is a narrowly defined cryptocurrency.

According to the definition of virtual currency in the previous section, the password consensus currency is also based on the Internet, private distribution, and virtual currency independent of the legal currency. The fundamental difference between it and the virtual currency that has appeared before is that it is distributed by means of cryptography and distributed consensus. Centralized.

The first password consensus currency, Bitcoin, succeeded in generating more types of cryptocurrencies in addition to copying Litecoin and splitting into a cryptographic currency such as Bitcoin cash. The most influential is the “ password credit currency” issued by government, individual or organization credit .

In January 2014, BitShares (BTS), founded by Dan Larimer, started crowdfunding in order to obtain development funding support, that is, the public funds the project before the start of the project (usually in bitcoin), and the proportion of investment after the BTS goes online. Get the BTS. This added the developer's credit to the early release of the BTS cryptographic currency. This is the beginning of the password credit currency. In July 2014, Etherum (ETH), founded by Vitalik Buterin, also adopted this crowdfunding model, which raised 31,591 BTC at the price of 2000 ETH/BTC. This crowdfunding has brought about a hundredfold more returns for investors and developers, driving the rise of credit-based cryptocurrencies. ^[44]

The BTC system provides users with the function of mortgage BTS to issue sub-currency and virtual assets, but this currency issuance has not been successful due to the large fluctuations in the price of the mortgaged BTS. The Ethereum system provides users with a more concise, non-collateralized, token-based (token, or sub-currency) issuance standard – ERC20. With the globally distributed Ethereum system and the ERC20 standard, anyone can spend dozens of dollars to make and distribute a token in ten minutes. As long as you rely on your own credit, some people are willing to pay the price to accept distribution (usually sales) and circulation. In the blockchain bull market in 2017, many cryptocurrency and blockchain projects were funded through the ETC20 standard token issued by Ethereum, known as the first token issue, ICO. At present, 165,690 tokens have been issued in the Ethereum ERC20 standard. ^[45]

The goal of these projects is often to imitate bitcoin or Ethereum to create a decentralized cryptographic consensus currency that bears the trading medium and value scale functions within a certain range. However, before the project was completed, the development team first issued tokens for ICO financing based on their credit. The core function of this era currency is credit financing, which is a kind of securities based on issuer credits that are confirmed by asymmetric passwords, which we call “cryptographic securities” . ^[46]

After these projects are completed (the so-called "main online line"), the development team will exchange the tokens endorsed by the project with the tokens issued in the previous period. Nominally, the token issuance after the majority of the project's main online line is decentralized, but in fact, in addition to the ICO crowdfunding token distributed by the team to the investors, the team will also generate a large number of tokens for the maintenance of the project. Team incentives, ecological construction, etc., are issued as needed. The time, quantity, objects, etc. of the issue are primarily determined by the team (or the so-called foundation). Therefore, this token is no longer a decentralized "password consensus currency" based on distributed consensus, but a cryptographic credit currency based on private credit , which is widely known as " passport " in China. Token), [4] We call it "password private currency" more accurately.

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