Central Bank Digital Money and the Crypto Assets Industry: A Dilemma of Public Resources

Recently, as some banks began internal testing of the Central Bank's legal Digital Money DCEP wallet, it has attracted widespread attention in the market. Discussions within the Crypto Assets circle have also become increasingly heated, but many people seem unclear about the relationship between DCEP and existing Crypto Assets.

In fact, DCEP, as a fiat digital currency pegged 1:1 to the Renminbi, does not have speculative space and cannot be directly used to exchange for cryptocurrencies like Bitcoin. Although it borrows from some blockchain technologies, such as using smart contracts for directed fund circulation and employing asymmetric encryption for identity authentication, it is not based on a traditional blockchain system.

It is worth noting that some criminals may use the name of DCEP to engage in virtual currency fraud. Therefore, investors need to be vigilant and guard against being deceived.

As the country orderly advances the transformation of the digital economy, the Crypto Assets industry still seems to be trapped in a frenzy of self-expansion. The market is overly reliant on Bitcoin's performance, internal competition in the industry intensifies, and new projects and financial derivatives continue to emerge. In this resource-limited field, some "innovative" capital plays are staging a "tragedy of the commons."

The "Tragedy of the Commons" in the Crypto Assets Industry

The "tragedy of the commons" theory in economics describes the phenomenon of limited resources being exploited due to overuse. This phenomenon is particularly evident in the Crypto Assets industry.

The Dilemma of Exchanges

During market downturns, exchanges face multiple challenges. Low trading sentiment leads to declining revenues, while competition among platforms is becoming increasingly fierce. To compete for limited users and funds, many exchanges have launched high-risk financial derivatives, such as high-leverage futures, options, and ETF leveraged tokens.

However, while these products bring profits, they also significantly increase risks. In the absence of sufficient user education, blindly promoting derivatives may accelerate user attrition. For example, during the market turmoil in March this year, leverage played a role in exacerbating the situation.

In addition, malicious competition between exchanges, such as mutual defamation and malicious marketing, is also detrimental to the healthy development of the industry.

Challenges Faced by Miners

The Bitcoin mining community is about to face a halving of block rewards, while the hash rate continues to rise. With the decline in Bitcoin prices, more and more miners are facing the risk of shutting down.

This situation is very similar to the story of the ranch in the "tragedy of the commons." When mining profits exceed costs, miners increase their investment in equipment, but since the daily Bitcoin output is fixed, the overall profit does not significantly increase. If the price of Bitcoin remains low for a long time, the profits of the entire mining industry will gradually shrink.

In recent years, although the price of Bitcoin has stabilized, the computing power has continued to rise. This means that the input-output ratio for miners is constantly decreasing, and mining is gradually becoming the exclusive domain of large mining companies.

The Dilemma of Public Chain Projects

Currently, among the leading blockchain projects by market capitalization, public chain projects account for a relatively high proportion. However, these public chains, born for applications, often lack truly valuable application scenarios.

As technology giants are increasingly entering the blockchain space, the traditional public chain projects' leading position in technological advantages is gradually being narrowed. Many top talents are attracted by large enterprises, putting public chain projects at a disadvantage in the competition for talent.

How to Break the Industry Dilemma

In the face of these challenges, all parties in the industry need to take proactive measures to find breakthroughs.

For exchanges, more effort should be put into promoting the innovation of blockchain and Digital Money, attracting more people to understand and participate in this industry. At the same time, industry rules and agreements should be established to eliminate malicious "harvesting" behaviors, strengthen user education, and cultivate risk control awareness. In addition, actively embracing regulation and promoting the compliance process will help attract more traditional investment institutions and funds to enter.

In terms of mining, it is necessary to foster self-discipline and consensus within the community to avoid excessive concentration of computing power. At the same time, explore new technological routes and business models to cope with the upcoming halving challenge.

Public chain projects should pay more attention to the application implementation, focusing on technology development from actual scenarios. Strengthen cooperation with external institutions, emphasize ecological construction, and cultivate and attract talent through collaborations between industry, academia, and research.

The Crypto Assets industry is still in the exploratory stage, and in the process of continuous trial and error, all participants need to adhere to the concept of "sustainable development." Only in this way can the industry truly welcome the dawn, rather than collectively collapse in the dark.