The risk and value of investing in "native digital assets"?

In yesterday's sharing, I shared with you the classification of assets, and today I will share with you the risks and values ​​of native digital assets.

1. How do native assets form their own value?

Native digital assets, mainly Utility Token (application-type tokens), and the representative currencies are BTC and ETH. The so-called "native" here means that they originated within the blockchain ecology, which means that they were born to solve problems within the blockchain ecology.

Because they solve the problems in the blockchain ecology, they show value and then are derived off-chain, thereby attracting the attention of investors. Therefore, their value origin is within the blockchain ecology.

BTC solves the problem of secure transfers in the absence of a central institution, and at the same time gives birth to the function of currency issuance, which arouses people's imagination of getting rid of the currency issued by centralized institutions, making it attract technology geeks from the beginning to attract investment later Or, and now its influence has spread to the whole world.

In this process, BTC has gradually broken away from a purely centralized transfer system and has been sublimated into a value storage target.

The birth of Ethereum is to solve the shortcomings of BTC that cannot handle complex business logic. It has changed the structure of BTC and realized Turing's complete virtual machine, which can handle complex business logic.

After its birth, people discovered that Ethereum can be used for free investment and financing in accidental practice, which led to global users flocking to the Ethereum ecosystem, trying to make free investment and financing, and the frenzy of ICO broke out.

After that, people tried further in the financial field, and gradually developed a series of new application scenarios including centralized finance.

In these practices and explorations, Ethereum has shown its unique value and has emerged from many altcoins.

2. What are the risks of this type of asset?

The biggest risk for such digital assets lies in whether the constituent elements of its established value will be replaced and surpassed by the latecomers. To replace and surpass the latecomers, they must find a breakthrough from the original ecology of the blockchain. If they can find this If there is a breakthrough, it may be replaced and surpassed.

This is the risk we must pay attention to when investing in such assets.

3. BTC, ETH and cross-chain risk analysis

As far as BTC is concerned, it has broken away from the use attribute and has achieved the broadest consensus to be sublimated into a store of value. Once this consensus is formed, it will be very difficult to surpass or even replace it.

So even if a new digital currency emerges from the blockchain field, which surpasses BTC in terms of performance, it only challenges the use function, but cannot challenge the storage value. So the possibility of BTC being replaced and surpassed is very small.

This is like gold. There are rarer metals such as platinum in the world, but people don't treat platinum as a financial asset, but as an industrial metal. Central banks around the world will not buy platinum as a financial asset in large quantities.

For Ethereum, its value lies in creating a variety of application scenarios in the ecology of the blockchain chain. Its risk lies in whether there will be a latecomer to form a larger and richer ecology than it.

At present, the vast majority of public chains that claim to surpass Ethereum only improve Ethereum in some areas, but they still cannot escape the framework of Ethereum. Therefore, it is difficult to surpass Ethereum in terms of usage scenarios and ecology, and it is also difficult to truly replace it. and beyond Ethereum.

If you want to surpass Ethereum, you must have a brand new architecture that subverts Ethereum like Ethereum subverts Bitcoin, so as to create a brand new platform and a new scene. So far, no such opponent has appeared.

There is another example in this field: cross-chain. At present, there are two most popular projects in the cross-chain field, one is COSMOS (ATOM) and the other is POLKADOT (DOT).

Although the technical strength of these two projects is very strong, and the technical architectures they adopt also have their own characteristics, they have not yet formed their own obvious advantages in terms of ecology, so it is still difficult to distinguish who will win in the end, and it is even possible Subsequent disruptors emerged beyond these two projects.

Therefore, when we invest in such native on-chain assets, we can start from these aspects and analyze them to avoid risks as much as possible.