Bitcoin experienced roller coaster price fluctuations from 2017 to 2018. as the country regulated Bitcoin trading venues, stopped ICO, and Bitcoin China stopped users Registration and other events, the price of Bitcoin began to plummet. Subsequently, with the launch of Bitcoin futures by the Chicago Mercantile Exchange in the United States and the introduction of the Japanese government's loose policy towards Bitcoin, Bitcoin began to have calls for developing into a "future currency". The price of overseas Bitcoin once approached US$20,000, and recently it has Hit back the $10,000 mark.
At the same time, various doubts or admiration views on Bitcoin have begun to permeate the market. In the context of global currency inflation, frequent asset bubbles, and competition among countries to print money, Bitcoin uses the concept of blockchain and the algorithm of total limit to give idealists hope to get rid of the proliferation of paper money and the fear of inflation. Today, some sovereign countries are beginning to say no to Bitcoin! Will Bitcoin, as an electronic accounting voucher without any government credit endorsement, really disappear in the long history? Is the decentralized currency route built by blockchain technology really just nonsense based on imagination? The author believes that Bitcoin may be short-lived, but blockchain or other decentralized credit exchange systems or recording systems will be a bold attempt for human society to get rid of the financial crisis, and will also be a reflection of the value of the free economy. This is the first time that people started to go from simply thinking about the loopholes of the monetary system to daring to challenge today's monetary system!
The essence of currency is the carrier of value exchange. Even in ancient times, in the early stages of the emergence of human society and economy, humans have learned to use certain items that are easy to preserve, relatively scarce, and easy to carry as a medium for the exchange of goods and labor. In the early days, this medium may have been embodied in shells, precious metals, etc. Eventually, over a long period of history, humans chose gold and silver as their general equivalents. Marx once said that "gold and silver are naturally not suitable for currency, but money is naturally gold and silver."
The ancient ancestors had the characteristics of rational people as described by Adam Smith. People chose to exchange their surplus items with others to achieve an increase in "utility". However, a person cannot always choose to drive his sheep a hundred kilometers away in exchange for other people's goods. Even if such a transaction occurs, if the value of the exchanged goods is much less than a sheep, it will be difficult for the other party to give change. . As a result, items that are easy to divide, easy to preserve, and relatively scarce are gradually used as equivalents.
Metals such as shells, gold, and silver have the above properties, so they become "things that people think are valuable." This is the essence and origin of currency.
(1)Does currency necessarily have value?
In fact, this question is difficult to answer. As we all know, in addition to their currency exchange value, gold and silver also have strong aesthetic value and industrial application value.
As a highly malleable metal, gold is widely used in jewelry processing and decoration of religious sites (gold on various icons), while silver is widely used in electrical components because of its excellent electrical conductivity.
We see that the value of gold and silver is divided into two categories, one is decorative value, and the other is industrial application value. In fact, industrial value was discovered only after the Industrial Revolution, but gold and silver as currencies had existed for a long time before the Industrial Revolution. In other words, the value of industrial applications cannot explain the source of the value of gold and silver as currencies.
From the perspective of decorative value or aesthetic value, gold's bright color and resistance to corrosion seem to be the basis of its value as a decorative item. But there are certain problems with this logic, because the alloy products produced by humans are no less lustrous than gold, but why does gold still maintain its status as a precious metal and its high price?
Ultimately, gold's value comes from scarcity. Scarcity means that the wealth of those who hold scarce goods will not be easily diluted. Coupled with the properties of gold and silver that are easily divisible and storable, gold and silver have played the role of currency most of the time in the long history of civilization. The golden color represents wealth, so gold has gradually been given more representations, making it an excellent jewelry material. I believes that it is not the aesthetic value that gives gold its value, but it is the monetary value that gives gold its aesthetic value.
The revelation that gold gives us is that what is scarce is beautiful, and what is scarce is reliable.
(2)Are centralized currencies necessarily safe?
Centralized currency relies on government credit to guarantee payment capabilities and reserve value. This logic is perfect. Because the government is the embodiment of coercive power, countless people give the government power through votes, and the government uses military force and security forces to maintain social stability. Therefore, the banknotes that the government promises to circulate are a reliable carrier of value storage.
Is this really the case? Let's just say it is sometimes the case. Good credit currencies, such as the US dollar, RMB, British pound, Japanese yen, etc., have maintained payment capabilities and good international reserve functions for a long time. But there are numerous cases of credit currency collapse. Zimbabwean banknotes, Venezuelan banknotes, and rubles from the 1990s, these centralized banknotes do not provide security guarantees to currency holders. What determines whether a centralized currency is safe is a stable political system, effective social governance and stable economic development. Whether a country's political system and social economy are stable are the most fundamental conditions for the value of banknotes.
In addition to political and social stability, what affects the security of banknotes is also the circulation of banknotes. After paper money is decoupled from reserves such as gold, how much paper money should be issued? Does paper currency match the growth of society's wealth? It has become the most difficult puzzle in economics.
The United States is enjoying the world dividend of the U.S. dollar and levies seigniorage from people around the world. The indiscriminately issued U.S. dollars flow to all parts of the world in exchange for a prosperous life for the American middle class. Although other sovereign currencies do not have the influence of the US dollar, in order to solve various domestic economic conflicts, such as deleveraging and fiscal crises, they have also chosen the so-called "quantitative easing", "economic stimulus plan" and "active fiscal policy". "These economic and monetary policies are essentially levying seigniorage, and by changing the "gold content" of currency, they actually achieve the purpose of regulating the distribution of wealth among all classes in the country. The random issuance of banknotes will have long-term and far-reaching harm to the credit of banknotes. This kind of credit loss of banknotes is often not noticed by the public, but they are unknowingly enduring the rapid rise in consumer goods prices and real estate prices.
The author believes that whether a centralized currency is safe depends on whether a country's political system and social order are stable, and also depends on whether it adheres to the principle of matching new currency with new social transaction needs. In the context of money printing competition and economic stimulation among various countries, security itself is a complex proposition.
When economists use economic stimulus as a stimulant and use various economic theories to rationally explain the rationality of currency watering, economic life needs to be protected by adhering to the ancient legal principle of the supremacy of property rights.
(3)The role of blockchain currency
Currency functions as a medium of exchange for goods or services, and its essence is the exchange of credit. In ancient times when credit could not be proven, people needed to rely on something recognized as valuable as a medium, so that they could find a method of payment settlement outside of barter. Since people are unreliable, reliable items are needed to convey the value between different commodities. Such items range from shells and copper coins to gold and silver.
The government centralizes currency issuance rights and issues government credit-guaranteed banknotes in order to find a credible credit medium for all parties to the transaction. However, the government is also a rational person like Adam Smith. The government always tends to solve its own fiscal crisis, solve the economic crisis caused by leverage, and solve the growth goal described by Keynes through easy methods. Therefore, banknotes are the best tool. Every time currency is issued in excess, there is always a high-sounding reason. When the tide recedes, what is left is overcapacity, structural imbalances, and asset bubbles, thus laying the groundwork for the next crisis. Banknotes are easily overissued, which damages the credibility of banknotes.
Under traditional technical conditions, people cannot find an alternative that can prevent over-issuance and facilitate circulation. The author believes that in the information age, computer technology and modern communication technology have created ways to transmit information at high speeds, as well as sophisticated digital encryption algorithms, which make it possible to record and transmit value through the Internet and computer systems. The concept of blockchain has raised it to the level of social values of everyone for one and one for everyone. In the Bitcoin world structured by the blockchain, each miner is repeating the account book records to construct a new block, and the generation of each block proves the authenticity of the previous account book records and also strengthens the The stability of the entire Bitcoin system. As a reward, miners who construct new blocks receive Bitcoins. If the Bitcoin algorithm is as its creator said, and the total amount of Bitcoins that can be generated is fixed, then this system not only has the function of preventing counterfeiting, but also has the function of preventing over-issuance. The mining process can be compared to gold mining. Miners perform a large number of calculations through computers, consume huge electricity bills, and create digital assets.
(4)The Nature of the Bitcoin Wave
Bitcoin is a scenario of blockchain technology. It is too early to judge whether Bitcoin will become a new world currency. Perhaps with the intervention of various countries, Bitcoin will eventually be submerged in the long river of history. However, the creation of Bitcoin itself is a manifestation of a social trend of thought and the product of people's reflection on the limitations of paper money. Its essence is an economic thought. After people reflected on the centralized banknotes guaranteed by national credit, they felt deeply helpless about its over-issuance and the resulting asset bubbles, inflation, and imbalanced distribution of social wealth. They had to seek solutions through modern information technology. New value carrier.
All countries need to face up to the economic trend of currency decentralization. The best way to eliminate Bitcoin is actually for each sovereign country to restrict its own currency issuance behavior and improve the credibility of banknotes, or to learn from the concept of blockchain to build a digital currency system led by sovereign countries.
Bitcoin is an attempt at a new currency credit mechanism. Regardless of whether Bitcoin can become an emerging currency, this attempt is positive.
Last,If Bitcoin ever reached 1 mil what would it market cap be? Wouldn’t that make Bitcoin more than all real estate and stocks in the US?