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Tales from the Crypto: China joins blockchain arms race, Libra under fire again

In the month since the last Tales from the Crypto, one of the big stories has been Chinas cryptocurrency U-t..

By admin , in England , at November 11, 2019

In the month since the last Tales from the Crypto, one of the big stories has been Chinas cryptocurrency U-turn, which included unveiling plans to launch a state cryptocurrency backed by gold.

The Peoples Republic has been a fierce critic of blockchain but president Xi Jinping recently pushed for the country to launch its own projects to counter US dominance in the sector.

Making a public about-face, Xi said China should be “expediting the development of blockchain technology and innovation-driven industrial development”.

Aside from using blockchain innovation as part of its push to maintain superpower status, the technology also seems to appeal to Beijing due to its unfalsifiable nature, meaning permanent records can be maintained while being almost impervious to hacking.

China has already used a blockchain system to automatically generate and file an enforcement case in court against a party that failed to pay damages, as well as a recently launched app designed to record and store information on members of the CPC.

The countrys proposed gilt-edged cryptocurrency might, said analysts at SP Angel, “generate substantial new buying” of the yellow metal.

The new digital currency could potentially take business away from Bitcoin, the broker said, however, the original crypto still had its advantage of simultaneous settlement, not possible with gold or fiat currency.

SP Angel added that it will also take global investors “some time to trust in Chinas backing” of its crypto, as while the PRC is currently sitting on around 20,000 tonnes of gold to back the currency, they questioned whether this will be sold in times of economic stress.

Bitcoin outperforms gold

Bitcoin also managed to beat out the yellow metal in terms of market price gains in October, posting a rise of 10.3% compared to golds 2.7% gain in the same period, and there are technical reasons why it could be heading even higher.

Bitcoin has often been suggested as offering similar haven qualities to gold, somewhere investors can put their money that is mostly separated from the volatility of the global markets.

Wayne Chen, chief executive of fintech firm Interlapse Technologies Corp (TSX-V:INLA), says while Bitcoin has always been considered a speculative asset, it is now viewed as “a better digital gold”.

“As popularity and demand grow, you will see more traditional investors diversify their portfolio into a more powerful version of gold because it is highly divisible, portable and transactable for micro payments”, he added.

And prices could be heading even higher over the next six months as a Bitcoin halving, when the reward for successfully mining a block of transactions on Bitcoins blockchain falls by 50%, is due around May next year.

A halving tends to be presaged by a rise in Bitcoin prices as it becomes harder for miners to obtain new Bitcoin, increasing its scarcity.

Spending bitcoin

However, while Bitcoin is harder to mine, the cryptocurrency is also becoming more popular as a currency that people use for purchases.

Thats according to industry data from analytics firm Coin Metrics, which shows cumulative transaction fees recently surpassed US$1bn (£775bn) for the first time.

Higher overall fees indicate that more and more users are conducting transactions in Bitcoin, however, the induvial cost of using Bitcoin for payments has fallen in recent years alongside the increase in volume.

This trend has been mostly attributed to the Lightning Network, a payment protocol released last year that allows Bitcoin transactions to be performed faster.

Global regulator puts finger on the Libra scale

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