Bitcoin has become "digital gold" (Economic Perspective)

The value of a single coin of the digital currency Bitcoin exceeded $2,400 on the 24th, setting a new record high. Since the beginning of this year, the trading price of Bitcoin has continued to rise, with a cumulative increase of more than 150%. "How much is Bitcoin today?" has become a special greeting for digital currency players.

Bitcoin's crazy rise is due to the combined efforts of multiple factors.

First, the shrinking market supply is a key factor affecting the price of Bitcoin transactions. When the Bitcoin system was launched in January 2009, the system designer Satoshi Nakamoto limited the total supply of Bitcoin to 21 million. The current mining volume has reached 16 million, exceeding 75% of the total. From the circulation level, as time goes by, the reward for Bitcoin system "mining", that is, transaction accounting, is halved every four years, from 50 in 2009 to 12.5 today, which directly affects the supply and circulation of Bitcoin, leading to its price increase.

Secondly, the technical upgrade of the Bitcoin trading system has greatly boosted the confidence of venture capital and development geeks, resulting in a strong short-term increase in Bitcoin prices. With the popularization of Bitcoin and blockchain technology, the average daily volume of Bitcoin transactions has reached an astonishing 250,000 to 300,000. However, Satoshi Nakamoto strictly limited the data capacity of each transaction when Bitcoin was first launched, resulting in up to 158,000 transactions waiting to be verified every day, forcing users to pay high fees to speed up verification, which increases the difficulty of Bitcoin payments. However, the two recently proposed expansion and speed-up plans - "Bitcoin Unlimited" and "Locked Segregated Witness" (SegWit) - are expected to improve Bitcoin's transaction efficiency and have been supported by most of the "miners" and technical geeks in the Bitcoin community, and the market's enthusiasm for Bitcoin has been rekindled.

Of course, the surge in Bitcoin also benefits from government support. The policy support for Bitcoin and the research and development of legal digital currency systems in some countries have driven the rise in Bitcoin trading prices. Specifically, the U.S. Securities and Exchange Commission decided to review two Bitcoin-related funds in May and will release the results in the near future; Japan announced that it would recognize virtual currencies such as Bitcoin as a payment method and cancel Bitcoin consumption tax; Russia will recognize Bitcoin and other encrypted digital currencies in 2018... In addition, China, the United Kingdom, the Netherlands and other countries have accelerated the release of their own legal digital currencies and other policy measures, which have attracted some merchants to try to use Bitcoin for payment and settlement. At present, the United States, Japan, China, Europe and other countries and regions lead the global Bitcoin market with an average daily transaction volume of 73 million, 73 million, 45 million and 31.4 million US dollars respectively. According to preliminary estimates, by 2020, the scale of Bitcoin transactions will exceed 3 billion US dollars, and its transaction price may reach 10,000 US dollars.

Since the beginning of this year, the price of Bitcoin has been "high and high", and has exceeded the price of gold many times, so it has been called "digital gold". However, as a virtual "digital gold", although Bitcoin has digital attributes, it does not have the high liquidity, low risk, stable value and difficult to control attributes of gold. Therefore, Bitcoin is still a high-risk, high-expected-return investment product, and still faces a series of risks such as changes in regulatory policies, cracking of consensus mechanisms, and substitution of legal digital currencies, which are mainly manifested in violent short-term price fluctuations. Therefore, it is better to pay attention to its digital attributes from the perspective of currency innovation and view its gold attributes in a cautious investment manner.

People's Daily (May 26, 2017, 21st edition)