Regarding the Cryptocurrency Realm: The Worldview You Need to Construct (Part 3)

Before 2015, Bitcoin held more than 80% of the market share in the blockchain space. It wasn't until 2017 that Bitcoin's market share significantly declined, and Ethereum began to gradually expand its market share.

Before 2015, the market was primarily driven by speculative concepts, and blockchain applications had not yet been implemented. Based on first principles, the primary demand for speculation is for trading. Due to the limitations in Bitcoin's performance and scalability, centralized exchanges emerged.

The original intention of Bitcoin and the emergence of centralized exchanges are theoretically contradictory. Satoshi Nakamoto's core concepts and workings of Bitcoin, as presented in “Bitcoin: A Peer-to-Peer Electronic Cash System,” involve several key points:

• Decentralization: It does not rely on central banks or governments, enabling peer-to-peer transactions without the need to trust third-party intermediaries.

• Digital Scarcity: Designed to limit the total supply to 21 million coins, giving Bitcoin a form of digital scarcity that can act as a hedge against inflation.

• Security and Transparency: Blockchain technology provides high levels of security and transparency, with transactions and block information being publicly viewable.

• Financial Freedom: Bitcoin enables people to engage in cross-border transactions worldwide without the limitations of the traditional financial system. These core concepts have served as tenets inspiring the development of the blockchain industry.

To achieve the goals set by Bitcoin, a highly liquid and decentralized market is required to provide support. Due to technical limitations, Bitcoin itself does not possess these characteristics, which is why the emergence of centralized exchanges became a necessary requirement. It can be observed that the blockchain industry has consistently required centralized infrastructure to meet user demands.

It wasn't until Ethereum's development reached a certain stage, with infrastructure improvements and developer participation, that DApps (decentralized applications) began to become usable.

From the historical development process, we can summarize several points:

• The emergence of centralized exchanges (CEXs) was necessary to address the problems the market faced at the time.

• Bitcoin represents an idealistic, technologically-driven concept for a new financial system. It does not adhere to traditional financial concepts such as being asset-backed or having positive cash flows.



Ethereum, created by Vitalik Buterin on July 30, 2015, aimed to provide a decentralized computing platform that allows developers to build smart contracts and distributed applications (DApps). Ethereum features a Turing-complete virtual machine known as the Ethereum Virtual Machine (EVM). Compared to Bitcoin, Ethereum offers faster transaction confirmation times, interoperability, and the ability to be upgraded and improved.

Building upon its Turing completeness, Ethereum's ERC token standard defines and standardizes tokens issued on the Ethereum platform. ERC-20 was a crucial early driver within the Ethereum ecosystem. ERC-20 is a standard for creating fungible tokens with smart contract support within the Ethereum ecosystem. It provides a simple interface that allows developers to create their tokens on the Ethereum blockchain and integrate them with third-party applications like wallets and exchanges.

Before Ethereum's emergence, anyone wishing to issue tokens had to build an entire blockchain, which was a daunting task. Ethereum's arrival helped lower the barrier to token issuance, and as developers built on top of Ethereum, these protocols established on Ethereum gained interoperability.

The core concepts mentioned above, originating from Bitcoin, have consistently guided the development of the blockchain industry. The emergence of centralized exchanges (CEXs) became inevitable, and Ethereum's arrival, while adhering to Bitcoin's concepts, gradually made it possible for blockchain to replace the functions of centralized exchanges.