Comments on the comparison between DW20 and Bitcoin, stablecoin DAI and the US dollar (Part 4)

——Comments on the concept of DW20 standard currency

“Comparison of decentralized standard currency DW20 with Bitcoin, stablecoin DAI and standard currency US dollar” is divided into four sections: 1. Design background of DW20, 2. Comparison with Bitcoin, 3. Comparison with decentralized stablecoin DAI, 4. Comparison with the US dollar. This article also comments on this order.

Comparison between DW20 and standard currency US dollar

Conditions of standard currency

DW20 has entered the standard currency stage after the stable currency stage. Currently, the comparison object is the big brother of the standard currency, the US dollar. The standard currency has pricing power, the pricing unit of commodities, and the pricing ruler. What conditions must the currency have before it can be used as a pricing ruler?

Mr. Zhu summarized it very well here:

1. It cannot be limited, but the total amount issued is subject to inflation constraints
2. It must be stable and cannot have large short-term fluctuations. Quantitatively speaking, currency’s volatility is 20-50 times lower than that of stocks.
3. There is an important settlement volume for global trade.
4. Another characteristic of legal currency is that the value of a legal currency depends on the comprehensive strength of a country. When the country’s economic changes inevitably affect the exchange rate of its currency in the international market.

Under the above conditions, the characteristics of the standard currency:

1. The standard currency must have a floating exchange rate,
2. circulate globally,
3. Freely convertible,
4. Ideally, it is not pegged to any currency and any country,
5. The market determines the value of a currency.

There are many legal currencies in the world, but few standard currencies. According to this standard, the RMB is not a standard currency; the Hong Kong dollar is a pegged stable currency, and the US dollar and the euro are standard currencies. The British pound and the Japanese yen meet the above standards, but the global trade settlement volume is insufficient.

The market pricing DW20. Like DAI, its pricing is based on the US dollar, but it is not pegged to the US dollar, and it can be circulated globally like cryptocurrencies and can be freely converted within the coin circle. DW20 has the primary conditions of a standard currency. The question is whether it can reach an important global settlement volume. It is still unknown. Once such a large amount is reached, it is not determined only by economic factors. From a financial perspective, getting the level of the Japanese yen and the British pound would be good. The ecological scale must then reach more than 4 trillion US dollars.

The world needs an independent currency scale that does not rely on any country

Zhou Xiaochuan, former governor of the People’s Bank of China, believes that “creating an international reserve currency that is decoupled from sovereign states and can maintain long-term stability in currency value, thereby avoiding the inherent defects of sovereign credit currency as a reserve currency, is the ideal of international monetary system reform.” The key words here are sovereign currencies decoupled from countries and long-term stability in currency value. The emergence of DW20 can overcome the defects of the US dollar. It is ownerless. When Bitcoin can measure global wealth, DW20 can be used for specific commodities. Commodity exchange constitutes GDP, which is far less than half of the total wealth, so it is valid to issue DW20 by mortgaging Bitcoin.

DW20 is a standard currency formed by consensus, which is precisely the same as the mechanism of Bitcoin.

Comparison between Bitcoin Standard and US Dollar Standard

The Bitcoin standard refers to using Bitcoin to measure global wealth. Bitcoin is pledged to issue DW20, which is used as a pricing ruler for commodities.

The Bitcoin standard is more scientific and advanced than the US dollar standard. For example, the issuance of US dollar currency by the Federal Reserve is manually adjusted, and the market adjusts the price of US dollar currency. There is generation gap between this and DW20, which is automatically adjusted by the market for both issuance and price. The issuance of legal tender by the Federal Reserve is based on economic forecasts, which are usually made by humans and are not necessarily accurate; the issuance of DW20 has nothing to do with economic forecasts, and it relies on a more precise market negative feedback principle. The short-term and long-term volatility of DW20 will be much smaller than that of the US dollar, and the market will naturally choose a high-precision ruler.

Mr. Zhou Xiaochuan does not want the US dollar to dominate the world. Mr. Zhou Xiaochuan’s ideal is not linked to any sovereign currency and is not controlled by any country, and it is also the common ideal conveyed by Bitcoin and DW20. DW20 and Bitcoin together constitute the Bitcoin standard, which is the ideal solution humans can currently see to replace legal tender and correct the defects of legal tender.

#BTC #DW20 #Satoshi @DW20 @soghita326134 @zhuweisha21