Why does blockchain project issue digital currency? What is the relationship between them?

Nov 22,2022
Why does blockchain project issue digital currency? What is the relationship between them?

Digital currency is called virtual currency. The earliest digital currency originated in 2009. Among its inventors, Ben Cong invented it to deal with the impact of the financial crisis on the real currency economy. BTC was the earliest digital currency. Later, there were virtual currencies such as Ether, Firecoin and Lite. These virtual currencies cannot be used for trading. Therefore, some novice investors ask why blockchain projects issue digital currency? What is the relationship between them? Then, let's follow Xiao Bian to have a look.

Why does blockchain project issue digital currency?

We all know that there is a centralized organization in traditional Internet products to maintain the normal operation of the entire product, such as Taobao. The centralized organization maintained behind Taobao is Alibaba, which establishes Taobao. Alibaba is responsible for the system update, resistance to hacker intrusion, and BUG repair of Taobao. If Alibaba fails to maintain Taobao one day, we cannot use Taobao.

The core of the blockchain project is decentralization. There is no organization behind it to maintain it. The entire network is voluntarily maintained by all customers around the world. If there is no profit trend, there will be no customers willing to do this.

Therefore, with the advent of Token, the blockchain project party will sell Token, users will use the blockchain network maintenance (mining) to obtain Token, and then turn Token into real legal currency profit through the secondary market (exchanges, private transactions, etc.).

Naturally, the effect of Token in the whole blockchain is not only to pay for the maintenance of network customers, but also to have more use scenarios. Otherwise, the circulation system of Token is not perfect.

For example, suppose that blockchain project A is a decentralized data storage service. Compared with centralized storage, it has the advantages of lower cost, avoiding data leakage, and higher security. The demander, that is, the enterprise that needs to store data, needs to pay a storage cost if it wants to store its data in blockchain network of A as well as in traditional enterprises.

Traditional storage enterprises charge legal coins (such as rmb and US dollars), while blockchain projects deduct Token issued in blockchain networks. At this time, the demander needs to go to the secondary market or other ways to purchase Token, and then use Token to pay for storage expenses. In this way, a complete circulation system will be formed.

Speaking of this, the reason why the blockchain project wants to sell Token (digital currency) is to maintain the operation of the entire network, and also to form a community of interests between the blockchain project and users. The better the project develops, the greater the requirements for token, the greater the currency price, and the more profits users will obtain.

What is the relationship between blockchain and digital currency?

It can be said that digital currency and blockchain are organically combined and closely related. Blockchain is the underlying technology of digital currency and the most important technical means. The most successful practice of blockchain is a breakthrough in the currency industry. As one of the technologies of digital currency, the application technologies of digital currency also include mobile payment, reliable and controllable cloud computing, cryptographic algorithms, etc. The popularity of bitcoin makes people understand the technical framework of blockchain and its broad application prospects.

Blockchain is actually a new type of data bookkeeping, which has a powerful role and is equivalent to a cloud storage role, because every time a certain period of transactions is completed, all transactions in that period are recorded, and full copies are made on all nodes, which is a "block". Therefore, there is no possibility of information being forged unless there is a way to invade most nodes. A blockchain is formed when blocks are connected end-to-end.

The biggest advantage of digital currency is that it can be programmed. It is a computer program and a code. Because it can be programmed, it is an intelligent loan currency. Because it is intelligent, the clearing is determined and the settlement transaction is realized at the same time.

Everything from programmable currency loans will become programmable finance, and from programmable finance to programmable economy.

Speaking of this, I believe you have a certain understanding of why blockchain projects issue digital currency, and what is the relationship between blockchain and digital currency. In general, digital currency is a kind of cryptocurrency. It is precisely because this kind of digital currency exists in a way that requires encryption. Therefore, digital currency needs the support of blockchain technology, which is also an advanced technology. Many well-known companies around the world are studying this technology, and the development prospect of this technology is incalculable.