CURRENCIES WITHOUT INTERMEDIARIES

The clash of economic interests of the U.S., EU, Japan, China and Russia due to the introduction of various U.S. sanctions threatens the world economy with further destabilization. The global financial crisis of 2008-2009 has already demonstrated that the leading countries could not come up with anything new at that time but instructed the central banks of respective countries to print more paper money to improve the stagnating national economies.

The Federal Reserve System (FRS) of the United States has succeeded in printing the American dollars. Apparently, the leaders of the world's leading developing countries have expressed disagreement with this step of the Fed, but their objections were not heard, considering that over 80% of world trade is made in the U.S. currency.

However, the revolutionary tendencies are steadily covering all spheres of public activities including the world currency architecture.

No intermediaries

The leaders of developing countries wish to see a single world currency but without the control of the issuing center in the hands of a separate state. But the mankind is unlikely to create even in the distant future a world government that would be financially effective given the varying interests of all the states.

The effectiveness of such recognized world structures as the UN, International Monetary Fund and World Bank has been questioned increasingly. Today, hardly anyone can declare the equality in world structures, the United States or Syria and Iraq covered by the fire. Most likely, we have to state the fact that the world's leading financial institutions such as the IMF and World Bank serve the interests of the developed countries.

However, virtual electronic money is a "ray of light", which breaks through the monopoly of the U.S. dollar. It is replaced by crypto-currencies with a peer-to-peer payment system, when payment between the two parties is carried out without an external administrator (third party).

In fact, the loss of control and ability to block transactions by the state has forced the most central banks to reject crypto-currencies as a legal tender. Central banks have declared crypto currency as a surrogate, since they are not provided with real value and cannot be used in the territory of most countries as a legal medium for payment.

Crypto-currencies grow in price

Not only the central banks, but also a number of experts are against the crypto currencies. They believe that crypto-currencies are a new kind of fraud in the foreign exchange market with a mechanism similar to the schemes of financial pyramids well known in the post-Soviet space such as MMM shares or "charitable societies". However, let us try to analyze virtual electronic money before comparing crypto-currencies with financial pyramids or "soap bubbles".

Crypto-currencies are decentralized and digital means of payment and a basis for virtual electronic currencies. The difference between a crypto currency and the traditional payment system is the absence of any intermediaries that carry out the payments. In case of crypto-currencies, given the absence of an intermediary, a block for sending coins is created. Each transaction creates a new block, and these blocks are connected with each other.

The most important part of the digital payment system is block-chain - a decentralized secure system consistent to hacker attacks. Block-chains are getting increasingly popular among many foreign companies. For example, Sweden is using block-chains to develop its land registry system while Microsoft and IBM offer services for creating block-chain services.

Every year a dozen new virtual crypto-currencies like bitcoin, etherium, and lightcoin are born. Today, the most expensive currency is the first virtual currency bitcoin released back in January 2009.

Currently, one bitcoin costs almost $3,000 with a perspective growth of its value to $5,000. It is difficult to believe that in May 2010, only two pizzas were bought for 10,000 bitcoins. Five years later, the average price of 1 bitcoin reached $360, and in 2016 it exceeded $1,000.

From August 1, 2017, bitcoin was divided into two parts - the classic Bitcoin Classic Coin (BTC) and the cache (Bitcoin Cash Coin), which allowed pessimists to see this as a possibility of the collapse of the bitcoin exchange rate. In fact, bitcoin was rather divided to an investment tool of BTC and BCC for mass users to accelerate payments and reduce commissions. Not surprisingly, the cost of classic bitcoin is seven times higher than that of the bitcoin cache.

Growth costs and prospects

The rapid growth in the value of the crypto currency, as well as the release of new types of virtual electronic currencies caused a negative and distrustful attitude of the representatives of the financial sector.

The latest financial scandals are increasingly attributed to crypto-currencies such as the theft of hundreds of millions, and sometimes even billions of dollars. It is enough to recall the recent arrest on July 25 of the Russian Alexander Vinnik in Greece, who is suspected by the U.S. authorities of laundering $4 billion through bitcoins. The use of virtual currencies for the financing of terrorism, payment for drug supplies and other highly questionable financial transactions was recorded.

The opponents of crypto-currencies note that their value is not backed with any assets, except the trust of the holders.

However, the negative moments associated with illegal financial transactions can be attributed to the costs of development of crypto-currencies. After all, the capitalization of bitcoins has exceeded $44 billion in less than ten years.

Bitcoins are different from financial pyramids in that it is possible to transfer funds abroad for a meager payment, while with a traditional transfer through the bank a considerable commission is paid.

In general, bitcoin is transformed from the object of speculation into the category of not only a payment instrument for the services provided, but also as a highly liquid tool used in business.

But the most important thing is that a new generation is being formed around the crypto-currencies, which is learning how to earn it, and using virtual wallets to pay for online goods and services.

A new world of values

In the current turning point in the history of mankind, a new denominator is being searched for, which could really assess the value of the currency. Until recently, this denominator was gold – a type of metal, which due to its physical properties and relative rarity served as a yardstick of existing currencies. But on August 15, 1971, the dollar’s convertibility to gold was suspended. Currently, the whole world has no other option than trust the FRS obligations, which is carrying out the emission of paper money at its own discretion.

Note that a number of leaders of developing countries, arguing about the need for a single world currency, suggested considering the potential of the country's productive forces and its natural resources during the emission of funds. That is, this point of trust is somewhat similar to the current situation with crypto-currencies.

It is about a breakthrough in computer technologies. Perhaps there is no other fairer measure for a single world currency than the amount of computing power in the current age of information technology. The creation of values ​​is not due to printing dollars, but through the necessary set of knowledge and the use of modern information technology.

Crypto-currency is a reality, and it is possible to create a very successful business with bitcoins. Surely, to start earning a crypto-currency (mining), one needs to purchase appropriate equipment. That is, a rig is assembled for mining, which is basically a computer system equipped with video cards and corresponding additional equipment. Numerous rigs create original mining farms. According to various estimates, the cost of a single server varies between $1,000-2,000. Despite tight regulations applied by the Chinese leadership on the turnover of crypto-currencies, China maintains more than 50% of the computing capacity for crypto-currencies.

It is all about enthusiasts for now

At first glance, the hype around crypto-currencies have bypassed Azerbaijan, and the mining farms are not familiar to us. But this is only at first glance. According to various sources, there are people in Azerbaijan engaged in mining crypto-currencies too, but it is difficult to name the exact number of our nationals earning crypto-currencies.

Some experts note that computer stores in some post-Soviet countries have run out video cards because of a huge demand by miners. This has increased the price of certain models of video cards significantly. By the way, the price increase on video cards over the past two months has contributed to the price of rigs, which now cost at least $3,000 instead of $2,000 previously.

Meanwhile, BitFury Company of Georgia has established a mining farm, which will allow Georgian entrepreneurs to participate in the virtual currency market actively.

Azerbaijan should pay more attention to the latest achievements in the field of information technologies, including the development of crypto-currencies.

The country is becoming more integrated into the world community. Perhaps after a certain period of time, a significant part of world trade will be conducted using crypto-currencies.

Payments with crypto-currencies are not a distant prospect. Given the rapidly changing world, the government of Azerbaijan should implement a number of preparatory measures so that the bitcoins and other virtual currencies do not cause problems in Azerbaijan’s financial system.