EXFBased on trust protocol...
EXFBasically, due to the similar reasons listed in the introduction, blockchain technology, which protects the online transfer feature of digital money, has emerged. Bitcoin, the cryptocurrency, was created on blockchain technology. Throughout this document, wherever bitcoin is mentioned, other cryptocurrencies (Ethereum, Litecoin, etc.) that actually use existing blockchain technology are also meant. Bitcoin basically works like digital currencies. That is, when we transfer money from our account to someone else's account; the numbers in our account decrease and the numbers in the other party's account increase. There is nothing physical there. In addition, bitcoin ensures the security of transfer transactions with its community and encryption technology.
Bitcoin gives everyone in the community a virtual ledger (actually to miners and those who set up a bitcoin wallet on their computer) and ensures that all transactions are recorded in this virtual ledger. Before each transfer transaction, each member in this community checks their own virtual ledgers and confirms whether this transaction is valid or not. Everyone in the community checks their virtual ledger (as a software) to let them know if the transaction is a valid one. This virtual ledger in the community is actually the blockchain. The encryption process takes place entirely on this ledger. In fact, with the encryption process, it is guaranteed that each record on the virtual ledger is immutable. The encryption technology called Blockchain basically works on hard encryption and easy verification.
So what did bitcoin originally aim to do and did it achieve its purpose? The main goal of Bitcoin was to enable the secure transfer of money between peers without being dependent on any authority. That was its purpose. So, has bitcoin achieved its purpose? Absolutely not, bitcoin certainly did not fulfill its purpose. I seem to hear this; “Are you saying that a project that has reached a market volume of 750 billion dollars as of now is unsuccessful”. My answer is absolutely yes. It is certainly true that it was a project that failed to achieve its goal. Let's now go into the details of bitcoin's failure step by step.
First of all, the most basic claim of bitcoin; Let's take the issue of transferring money between two people without the need for a central authority. Could Bitcoin technically do this? Absolutely yes. This process is not a difficult process technologically anyway. You will decrease the numbers from one account and increase the numbers from the other account. That's what bitcoin does anyway. So what does bitcoin fail to do? Let's examine this with an example scenario.
Alice and Bob want to transfer bitcoins among themselves. However, Alice and Bob have never met each other before and there is no previous connection between them. They met through the Internet. Alice wants to buy bitcoin and Bob wants to sell bitcoin. How will the transaction take place now? There is no central authority.
In the first scenario, Bob sends the bitcoin Alice requested to Alice's wallet. This money transfer transaction is irreversible. When Alice receives the bitcoins, she transfers the money they had previously agreed to to Bob. In the second scenario, on the contrary, Alice transfers the money first and then Bob sends the bitcoin to Alice's account. So will Bob send the bitcoins to Alice? Is there a guarantee that you will send it? Once the money is transferred from Alice to Bob, it is irreversible. Likewise, once bitcoin is sent from Bob to Alice, it is irreversible. So in this way, this transaction does not take place in confidence. In these scenarios, there is no way to know who is trustworthy and who is a fraud.
Bitcoin can technically transfer money between peers without a central authority. But this is only possible in theory. In real life, as in the example we just explained, it will most often not be possible. It is precisely because of this need for trust that cryptocurrency exchanges have been created. Since bitcoin transfer between spouses is not practically possible, exchanges can be made on crypto currency exchanges that spouses can trust. You transfer your crypto money, namely bitcoin, to this stock market that you trust and authorize it to trade on your behalf. Thus, the stock market you trust sells your crypto money on your behalf or buys crypto money on your behalf. The bad news is that they take trading commissions from you during these transactions. This bad news is the best of all bad news. Using a crypto exchange can have far worse consequences. Okay, it seems safer than a money transfer between two people, but this is not always the case, let's explain.
Anyone who wants to own Bitcoin must obtain a digital wallet. You can think of this digital wallet as a physical wallet, but it is a little different, it basically keeps your digital key, not your money. This digital key is a very long number and is unique to you in the world. There is no other of the same number. This number creates your unique digital signature.
You need this digital signature in order to be able to transact on your digital currencies, that is, to transfer your bitcoin to another wallet. Bitcoin system; does not recognize you by your name, surname, identity or social security number. Your only connection to the Bitcoin system is this number produced exclusively for you in the world. If you give this number to someone else, that person can do all kinds of transactions on your bitcoins, just like you. This means giving your special number to someone else, giving the wallet with your money to someone else. In short, for bitcoin, it's your digital signatures created from these long numbers that make you who you are.
In order for a cryptocurrency exchange to sell your bitcoins, naturally, it needs your digital signature, otherwise it cannot trade on your bitcoins. Therefore, if you want to trust and work with the cryptocurrency exchange, you must give the exchange a copy of this digital signature that belongs only to you. So what happens in this case? If you're really very trusting, nothing bad might happen. But it's not just about whether you trust that exchange or not. As a result, what we call that crypto exchange may contain software or non-software vulnerabilities installed on a central server.
After all, this central server is a server that anyone in the world can access. In this case, your digital signature could be stolen and you could lose all your bitcoins. This is an event that has happened. Also, if the owner of this crypto exchange one day, he may take all the bitcoins on his exchange and flee to a different country. This event took place in 2021 on a crypto exchange in Turkey.
As you can see, bitcoin has claimed that it will transfer money between two peers without a central authority. However, bitcoin holders have been forced to use crypto exchange. In other words, instead of a secure authority like states, it has forced them to use crypto exchanges, which are much less secure. As a result of this, as we have just said, in 2021, the crypto money worth 2 billion dollars was stolen by the owner of the stock market.
Bitcoin is a currency with a fixed supply. In other words, there cannot be more than 21 million bitcoins in the world. As the reason for this; there is a logic that if it is less, it will be valuable, if it is more, it will be worthless. True to a certain extent, but not entirely. Let's explain it this way. The fact that Bitcoin is created with the claim of transferring money between peers without a central authority also means that it will be used as a means of exchange for peers. In other words, bitcoin also claims to be a medium of exchange for products and services instead of physical money. Such a claim requires a very, very small rate of change in the value of money for the referenced goods and services. I want to say this; for example, while 20 bikes can be purchased with 1 BTC today, buying 200 bikes after 1 week and purchasing 4 bikes after 5 weeks prevents bitcoin from being a medium of exchange. Markets cannot price this rate of change (volatility). This is certainly true for bitcoin today.
What happened with Bitcoin shows exactly this. Just 1 bitcoin sold for over $63,000 on April 16, 2021, and $38,000 on May 27, 2021. Such a rapidly changing currency cannot be used as a medium of exchange for the markets. However, why was bitcoin $63,000 on April 16 and why did it drop to $38,000 on May 27?
It is possible to explain and even predict why any country's currency rises and falls against other currencies because these values are based entirely on real-life economic data and are rational. If a country's economy management cannot manage economic parameters such as production, employment, high value-added products, etc.; that is, if it cannot manage its economy well, it will print money to compensate for the deficits in its economy. This will basically reduce its value against the currencies of countries that regulate their own economy well. It is rational, predictable and measurable. So is this the case with bitcoin? Definitely no. Maybe you have heard of people who got rich from bitcoin in one day on various social media platforms. Besides, you will see few people who have lost almost everything. It only takes a little research to see many more losers.
You may have seen photos of people who, in a few days, have achieved riches that they couldn't get by working in a lifetime, with bitcoin investments. The question is, what did these rich people predict and invest and get rich? What did Bitcoin promise them? There is absolutely no clear answer to this question. The only but only logical answer that can be given is that the community, that is, people who want to buy bitcoin, think that this technology is the technology of the future and invest (Or at least some of them think so). Or it is the desire to become rich in a short time by listening to those who say that they will rise in a short time.
Apart from that, since bitcoin is not used as a medium of exchange and a certain authority does not own it, it basically has no arguments to make it valuable. I ignore the fact that people's personal information cannot be tracked in money movements. If you are using a crypto exchange, this is not possible either; because crypto exchanges request all your information from you to open an account. In addition, it should be noted that blockchain is open to everyone due to its structure. When the crypto exchange is not used, personal information may not be tracked in money movements. However, the transfer of money between wallets is traceable.
Also, on April 16, when people thought it was the technology of the future, why did a large part of this huge community suddenly change their mind on May 27? It is clear that bitcoin has been speculated by high-profit individuals and groups; that is, it is a speculative currency that is artificially raised and sold after making the necessary profit.
It is not possible to say exactly if or when this will happen, but what will happen when this community that wants to own bitcoins stops demanding bitcoin for any reason?
Also worth mentioning is the 51% attack and vulnerability for bitcoin. When explaining how Bitcoin works; we said that each wallet in the community has a virtual ledger (miners and those who have a bitcoin wallet installed on their computers) and before each transaction, this community is asked whether the transaction to be made is valid. We mentioned that each virtual ledger owner in the community checks their own virtual ledgers before the transaction and confirms the validity of the transaction to be made.
Now, for simplicity, let's think about it this way. There are 100 people who own the Bitcoin, virtual ledger, and let's assume that the transaction is approved by getting approval from these people or a large part of them before each transaction. If 51 of these 100 people in our sample had previously agreed among themselves for a particular wallet. What if that wallet owner claims to have money that doesn't really exist, and those 51 people confirm it, even though it's not true? Yes, in this case the system will accept that it is a valid transaction and this transfer will take place. A transfer of money that does not actually exist will have taken place.
We have just mentioned that bitcoin has no known value except that it is valued by the community, as it is not under the control of any particular authority. So why is the US dollar valuable? It can be expressed briefly as follows. “Because of the authority that put it into circulation”. Okay, where does the value of this authority come from? It can be summed up in one word; TRUST. Yes, in fact, states do not print money in exchange for the authority they have. The main issue is the trust in that authority. All in return for this, people transact with this printed currency. If there is no trust, that authority and that currency have no meaning. The value of that currency is largely determined by the trust in that authority. That is why such currencies are called fiat money.
Based on Bitcoin and the blockchain on which it is built, the first step of the currency, which will be the real exchange tool of the future, has been taken. So is it possible for any cryptocurrency to do what bitcoin can't? Absolutely yes and EXF (Exchangeable fund) was created for this purpose.
So how will EXF be used as a medium of exchange instead of bitcoin, which counts for bitcoin and cannot be used as a medium of exchange? In the rest of this white paper, you will find step-by-step answers to this question.