Lang Xianping: Why don’t I want those 100 bitcoins?

Recently, many people have seen this screenshot that went viral online. It was a screenshot of me refusing 100 bitcoins given to me by someone with both hands. At that time, the virtual currency was soaring. I chose to remain silent after seeing it. Bitcoin has almost been cut in half in the past few days. I specially sent the screenshot video as an Easter egg to everyone (the screenshot is out of context, for details, click on the full video at the end of the article) Let's talk about Bitcoin again. I believe that many people don't know one thing.

Just like no one has ever explained to you how the RMB or the US dollar are printed, Satoshi Nakamoto did not expect you to really understand how Bitcoin came about. But all scams have one thing in common, that is, the inventor must have copied and modified something from the real world.

What is the origin of Bitcoin?

What is this plagiarized and borrowed real thing? It is called BOINC (Berkeley Open Infrastructure for Network Computing), which is one of the current mainstream distributed computing platforms. It was developed by the Department of Computer Science at the University of California, Berkeley in 2003.

What is distributed computing or open grid computing? For example, everyone has a computer, but you don't use it often, or even if you turn it on, there is a screen saver, or you just type and watch videos. At this time, you don't use the supercomputing power of the computer itself, right? So, the University of California, Berkeley came up with a way to use the extra computing power of everyone to solve the most important cutting-edge research for mankind, such as selecting from the data photos of radio telescopes which may be another Earth in another galaxy. In this way, for example, there are 100 million computers in the United States. While you are watching the video here, they are studying and calculating these most important problems in the background. The extra computing power of 100 million computers distributed in thousands of households is basically better than many supercomputers, and it saves the huge investment of tens of billions of dollars in supercomputers by the national finance.

Then, how do they reward you? First, they give you a free and very nice screen saver animation. This animation is actually a radio telescope photo that your computer is calculating. The universe is very beautiful. Second, they occasionally send you a certificate of honor and send it to your email address.

If you take the time to research a little, you’ll find that BOINC and Bitcoin are essentially the same thing.

❶ It allows you to participate in computing anywhere as long as you have a computer, network and electricity. This term is called distributed computing. The technology behind it needs to solve distributed accounting, data encryption, etc.

❷ The project of participating in the calculation itself has no economic benefits, so they can only give you an electronic certificate of honor to thank you for providing computing power; but those who do not participate in the calculation will not get this very limited certificate of honor. If you want to get it, you have to spend money to exchange it with those who participated in the calculation and received the electronic certificate of honor.

❸ Information is asymmetric and non-transparent. You actually have no idea what you have done. Even if the person who initiated the project uses your computing power to confirm gravitational waves behind the scenes, the Nobel Prize belongs to him, not you.

So, what is Bitcoin? Bitcoin is an electronic certificate of honor that cannot be pirated.

How much is it worth in Marx's eyes?

According to Marx's view, value is the undifferentiated human labor condensed in commodities, that is, the value of commodities. Marx also divides value into use value and exchange value. Therefore, how much is this "certificate of honor" of Bitcoin worth?

The first cost is that it costs money to buy a mining machine, which is about a little more than 10,000 yuan. The second cost is the electricity cost. Power 1.4 kilowatts * 0.45 yuan/kilowatt-hour electricity cost * 24 hours, which is equivalent to 15 yuan electricity cost per day. How much electricity does China waste in a year to calculate Bitcoin? About 5 billion degrees, which is equivalent to the power generation of the Three Gorges Hydropower Station in one month. So much electricity was wasted, but nothing practical was produced.

Therefore, Bitcoin is essentially a thing with a use value of 0, but its exchange value can be 10,000 yuan.

Why do I say that? Because starting from the source of distributed computing at Berkeley University, using such a huge computing power, the thing itself has no visible economic value. Even from the source, Bitcoin is a Ponzi logic, a self-circulation. You spend 10,000 yuan to buy a mining machine to calculate Bitcoin for a long time, and you just calculate a random number. This random number meets the characteristic solution of Bitcoin rules and can become a qualified Bitcoin. The key to being qualified is that only 25 will be produced in the world within 10 minutes, and there is no way to cheat on this.

But why is there any exchange value? Because it is indeed a damn thing. You have to spend 10,000 yuan to buy computing power to get it from the primary market through calculations; or you can spend a similar price to exchange it from the secondary market.

Blockchain, who is lying?

Regarding blockchain, there is one thing that I think many people don’t know.

Currently, most of those who are advocating the unlimited application prospects of blockchain are driven by profit. The real situation is not what you can see in Chinese media. I quote a few relatively objective reports from foreign media:

The conclusion of a foreign expert, Kestin Chicom, is even simpler and more direct: Ten years have passed, and no one has really found a breakthrough application for blockchain.

What doesn’t blockchain solve?

The blockchain was originally intended to power cryptocurrencies like Bitcoin. Many people are claiming that Visa and MasterCard are dinosaurs that are about to become extinct, and bank transfers are becoming obsolete because there is no need for commission-charging middlemen - that is, there is no cost and instant transaction. The revolution in banking is just the beginning...

It didn’t take long for that dream to fall apart. First, there was already a way to do instant transactions at no cost without a middleman: cash. Bitcoin was just a replacement for the dollar, but Visa and MasterCard actually offer a range of value-added services on top of dollar-based bank transactions, including our Alipay and WeChat Pay, such as enabling banks to track fraud disputes and verify the identities of buyers and sellers. It turns out that for people who use the payment product, the key feature of a new payment system (think PayPal or the early stages of Alipay in China) is the confidence that you can get your money back if the item is not as described. For people who accept payments, the main feature is that their customers have it and are willing to use it. No one really wants to pay with Bitcoin, which is why Bitcoin hasn’t caught on yet.

Also, Bitcoin is not actually a very good payment system - Visa can process 60,000 transactions per second, while Bitcoin has a record of 7 transactions per second. Technology to improve Bitcoin's efficiency is being studied, but the starting point for this new technology is only about 0.01% of the performance of existing transaction systems. It is worth noting that even for these 7 transactions, the energy consumption of the Bitcoin transaction system has reached 35 times that of Visa. If you increase the transaction volume of Bitcoin to Visa's scale, the electricity consumption of this thing alone will use up all the electricity generated in the world each year, that is, it will take 5,000 nuclear reactors to provide the required electricity.

There are two reasons why Bitcoin or any blockchain-based digital token is not a panacea: the first is the advantages that governments have over individuals, and the second is the advantages that formal banks have over non-governmental organizations.

The biggest feature of the government-backed banking system is that even if the bank goes bankrupt, your money is safe. The government's deposit insurance for deposits under 500,000 yuan provides you with full insurance. More importantly, if your money is in the bank and someone robs the bank, the bank cannot be exempted from liability and must unconditionally honor your deposit. Behind this is the guarantee, reversibility, identity verification, audit standards, and investigation system for each sovereign country's legal currency when things go wrong. By design, Bitcoin does not have these things.

There have been numerous cases where many people’s Bitcoin accounts were hacked because their emails were hacked, their passwords stolen, and then robbed. He was scared and overwhelmed, and there was nothing he could do. If you lose your private key to Bitcoin, your money is gone, and there is no recourse. This situation is very common - in 2014, the then Bitcoin trader Mt.Gox lost $400 million of investor funds due to security issues. Another Bitcoin trader Bitfinex also closed due to the loss of customer funds.

Imagine if there are more unsafe banks than safe banks in a country, what will happen to that country? There will definitely be a large-scale run on the bank, the collapse of the financial system, especially the banking system, and even the collapse of public confidence in the regime. So, the current Bitcoin or various blockchain tokens are the banking industry in the Middle Ages. In the long run, maybe in 20 years, someone will be particularly awesome and someone will make the first pot of gold from it. After all, there are so many smart people in it, and there will definitely be heroes. However, as an ordinary person, I strongly recommend that you do not participate in this game, which is probably doomed to be a losing game 99% of the time.