“The cryptocurrency market is moving the regulatory indecision: the impact of blocks reward and liquidation on financial stability”
The cryptocurrency market has experienced roller coaster driving in recent months, and prices that float wildly between ups and downs. One of the main factors contributing to this volatility is the constant debate on regulation. Although the government and institutions continue to face the complexity of the crypt, two emergency problems attract attention: block reward and liquidate.
BLOCK RELESS
The Block Reward system is the main aspect of how cryptocurrencies work. Incentives are approved by network transactions by providing reward in the form of new coins or tokens. The award is calculated as the number of many blocks, with 6.25 new Denos (a total Bitcoin offer) for each block.
As most miners connect to the network, the block’s reward is reduced, resulting in lower competitive new arrivals joining the space. This, in turn, can increase costs and reduce assistance miners to confirm transactions. For example, if the mining has long confirmed surgery on the Internet, they may be unfavorable in the face of smaller blocks prizes.
Effect on financial stability
The decrease in the block reward can have significant consequences for the cryptocurrency market. As fewer mining is competing for approval, the cost of processing operations increases, resulting in more expensive users from sending and getting cryptocurrencies. This can lead to higher commissions, reduce liquidity and increased volatility.
In addition, the decrease in the unit can also affect the overall stability of the network. If the mining are less encouraged to approve transactions, they may be less likely to participate in the network, reducing scaling and enlargement in blockchain congestion. Finally, this can be detrimental to the financial stability of the entire market, as consumers become careful when sending and receiving cryptocurrencies.
Liquidation
Liquidation is a regulatory concern that has received a lot of attention in recent months. As the cryptocurrency market continues to grow, the regulatory authorities are increasingly worried about the risk of decentralized financial platforms (Defi) and other cryptocurrency services.
Liquidation means the process of closing or termination of a DIFI platform or service when it becomes unsustainable due to excessive loans, margins or other factors. This can lead to significant financial losses for consumers as well as increase regulatory control.
Regulators are also concerned with potential risks associated with decentralized exchange (DEX), allowing users to directly change cryptocurrencies without central colleagues (CCP). While the DEX can increase accessibility and liquidity in the market, regulatory authorities are increasingly worried about being exploited by unscrupulous operators who prefer consumer security mouse.
Regulatory uncertainty
The regulating panorama of cryptocurrencies is very unclear as the Government and institutions are still fighting the complexity of Defi, NFT and other emerging technologies. As a result, many services based on cryptocurrencies are hesitant to act in some jurisdictions or to face major regulatory obstacles.
In addition, regulatory authorities are increasingly worried about the potential risk related to decentralized management models where “chips” owners “have voting power due to network decisions. This led to stricter rules on DiFi platforms and other cryptocurrency -based services.
Conclusion
The cryptocurrency market is facing a complex series of challenges, starting from the block reward and from liquidation to regulatory uncertainty.