Bitcoin prices fell by 70% because of Impossible trinity

It is well known that the Impossible trinity exists in traditional economics, proposed by the American economist Paul R. Krugman. Impossible trinity means that when a monetary sovereign state establishes monetary policy, it is impossible to achieve a balance between its monetary policy independence, exchange rate stability and free capital flow. Usually only one of the independence of monetary policy, exchange rate stability and free flow of capital can be achieved. A maximum of two of them are guaranteed.

Blockchain technology also has Impossible trinity: “high efficiency, low energy consumption”, “decentralization”, and “security”. Combined with the characteristics of traditional currencies, Bitcoin may become the digital currency of the world’s mainstream currency in the future. The core of its underlying technology architecture, blockchain technology, will be the focus.

First, the pursuit of safety and high efficiency and low energy consumption can not be decentralized

According to the concept of “decentralization” of Bitcoin, to achieve decentralized storage and management of all information, it is possible to avoid large problems caused by the failure of the central organization. However, the reality is that most of the business services and application ecosystems based on the Bitcoin application ecosystem are central. Many businesses that offer crypto business services and operations run at specific locations, specific devices, and specific people. And the important point is that the legitimacy of the platform is also worth considering. For example, monopolize the bitmain of Bitcoin mining.

Second, the pursuit of “high efficiency” and “decentralization” must sacrifice “security”

For example, a large number of video apps installed in mobile phones are facing high “security” risks while pursuing performance and decentralization. Assuming that there is an explosive topic in a video software, the flow of people on the website will increase dramatically, and the central server will face tremendous pressure, causing stagnation and sluggishness. The website usually chooses to download a video to a third party at the same time as downloading the video. Each node is both a downloading end and a server, so that the pressure of the central server can be alleviated and the video data is realized. “Decentralization.” However, there is a risk of disclosure of various data.

Third, the pursuit of “decentralization” and “safety” can not achieve “high efficient”

In designing the overall structure of Bitcoin, Nakamoto chose a combination of “decentralization” and “safety” technology to weaken the efficiency. According to the characteristics of the data structure, Bitcoin adopts a time-stamped “block + chain”, which ensures the traceability and tamper resistance of information and data, and also promotes the synchronization of distributed data. However, when the system verifies and queries the data, it needs to “traverse” all the data on the chain. Due to the redundancy of a large amount of data, this process brings a great workload and becomes “efficient processing”. Become a problem. Bitcoin has experienced about 10 years of development and there are still few transactions that can be processed per second.

I think that Impossible trinity cannot be overcome with current technology. This may be why bitcoin prices have fallen from $20,000 to $6,300. But we will continue to focus on the development of blockchain technology and cryptocurrency. Many ICO projects boast that their projects are free, safe and efficient. Before you invest, be sure to keep in mind Impossible trinity to prevent being deceived!

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