The collapse of cryptocurrency, or the "black swan" of the digital economy
The collapse of cryptocurrency or the "black swan" of the digital economy
"Black Swan" - this, partly romantic, name was given to the theory that considers any system in terms of scenarios that lead to its complete destruction. It applies to any ecosystem, including cryptocurrencies. In this article, we will look at how likely a cryptocurrency collapse is and what it might be from the perspective of the black swan theory.
- WHAT IS A BLACK SWAN?
To begin with, we'll go a little deeper into the concept of the "black swan" itself. Let's start from afar. In any segment, regardless of its direction, there is always such a cluster of users/consumers/participants as critics. If we talk about cryptocurrencies, we can distinguish the following varieties:
"Bearish" critics who do not believe in the long-term potential of cryptocurrencies.
Technical critics who argue that cryptocurrencies and blockchain are very difficult for everyone to understand and accept.
Regulatory critics, represented by banks and financial institutions, who simply fear displacement, etc.
All of them express their doubts about cryptocurrencies in a common-sense way, evaluating one or another of their qualities. The "black swan" theory considers a complete collapse of cryptocurrencies as a consequence of some unforeseen action leading to the worst results.
Accordingly, if it cannot be prevented, it is necessary to "know the enemy in person. Let's look at a few scenarios that fit the "black swan" theory.
- CRYPTOCURRENCY COLLAPSE: A BAN BY REGULATORS
Today, cryptocurrencies operate in a gray legal zone, because there is still no more or less working legal framework that could really regulate the segment of digital currencies. It is still unclear what cryptocurrencies are and from which position to regulate them.
According to the "black swan" theory, one day the situation will change dramatically. Regulators all over the planet will simply introduce categorical bans on cryptocurrencies and their use.
Notably, those who adhere to this theory argue that such a scenario does not necessarily require all countries to impose such bans at once. It would be enough that, for example, the United States and South Korea would restrict the operation of exchanges. As a result, millions of funds stored in the accounts of trading platforms will simply be frozen.
- CRYPTOCURRENCY CRASH: CODE FAILURE
Another possible scenario, consistent with the "black swan" theory, is fatal errors that lurk in cryptocurrency codes. Such phenomena are already quite common today. For example, Verge was attacked relatively recently. Hackers were able to breach the system and mine the cryptocurrency on low complexity, which earned them millions of dollars.
It is assumed that cryptocurrency systems are not perfect, and in the future a weakness could be found that would allow hackers to break into blockchains without hindrance. This is especially true in the future, when quantum computers become quite common. No one can say for sure whether cryptocurrencies will be able to protect themselves from such machines.
- THE COLLAPSE OF CRYPTOCURRENCY: FORKS AND HACKS
Due to the fact that cryptocurrencies are purely digital products, there are various technological attacks. In addition to the work of hackers, there is another problem that lurks within the ecosystem itself - forks. On the one hand, they allow to the optimization of the system, but on the other hand, they expose it to danger.
Imagine if today the various states of America start issuing their own currencies. What will happen to the country's economy? It would collapse dramatically. So it is with cryptocurrencies - active crushing can lead to the decline and lower acceptance of digital money. In addition, it generates unhealthy competition - developers will try to lure users to their coins. Some will stay with the original, while others will leave for the fork.
So, for example, Bitcoin and its fork Bitcoin Cash. Yes, it wasn't that successful, but it still drew some users to it. What if there will be a hundred or a few hundred projects like that? Then we will have a market with thousands of different cryptocurrencies, supported by small groups of people.
The biggest problem is that the collapse of cryptocurrency in the "black swan" theory is hard to predict. No one knows when this or that event will happen. Although digital currencies have high potential, the market itself is still very young, so we should expect the unexpected.
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