Andreas Antonopoulos: Subverting the concept of traditional currency, the value of Bitcoin comes from faith

As the old saying goes, money makes the world go round. Yet, we rarely explore the value or history of money.

From barter to gold coins, from gold coins to currencies pegged to gold, and then to the era of paper money, the medium of exchange has continued to evolve with the progress of human civilization.

More and more people are beginning to believe that the future belongs to digital currencies - such currencies are virtual, decentralized, and not regulated by central banks (central banks usually regulate fiat currencies).

Bitcoin is based on blockchain technology and is currently the most famous digital currency.

When Bitcoin first came into the public eye, many people believed that it was “not real” money, that it could not be held in the hand or kept in a physical wallet.

In a public speech organized by Zebpay, Bitcoin expert Andreas M Antonopoulos detailed the idea of ​​decentralized currency and the need to deregulate it.

Andreas is a technologist and entrepreneur who is one of the most well-known and respected figures in the Bitcoin space.

In the interview, he explained the reasons why Bitcoin has advantages over fiat currency, as well as issues such as the source of Bitcoin's value and mainstream popularity.

Q: Why is Bitcoin better than traditional currencies? What is the idea behind it?

Andreas: The answer to this question is simple, people will always prefer the Internet to the telephone network and postal service.

The Internet has created opportunities for cross-border dissemination of information, and everyone has equal rights to access information. The focus of the Internet is not on protocols, which change in real time, but on the free flow of information.

Bitcoin represents the free movement of money. It's that simple. So why do we need free movement of money? Because the money we currently use does not have this feature. In fact, the money industry is the most restricted, regionalized, anti-competitive, and state-monopolized industry in the world today.

It is the only industry in existence that has not been challenged by information technology. Therefore, the free flow of money is currently the core concept, and this is achieved through protocols. There is no central authority in this protocol, because once a central authority exists, the free flow of money cannot be achieved.

Central institutions will definitely set limits. Just like the Internet, because there is no third party, there is no review and various license application requirements.

So, this is why Bitcoin exists.

People are aware of the advantages of Bitcoin and are excited about it, thinking it is a new way to invest. But Bitcoin is not the best investment, and its volatility is relatively large. Therefore, for ordinary people, the risk of Bitcoin investment is even greater than that of Internet stocks in the mid-1990s - they have experienced multiple bubbles.

However, the bubble experienced by Internet stocks is completely different from the Internet itself and its impact on mankind. Therefore, Internet stocks can collapse due to bubbles, but the Internet will not disappear. This field continues to produce new companies and make continuous progress.

As a protocol, Bitcoin is developing much like the Internet. It doesn't care about price changes, if all the companies involved disappeared, Bitcoin would still exist. These companies are just tools to obtain, use and profit from Bitcoin, and the price is just a reflection of the value of the currency, and the current volatility is still very high.

Some people still choose to use Bitcoin to enrich their investment portfolios. Bitcoin's asset correlation is different from other commodities.

From a monetary perspective, whenever fiat currency depreciates, the price of Bitcoin will increase, and its price trend is similar to that of gold, thus forming an asset class similar to digital gold.

Q: When will Bitcoin become a medium of exchange rather than a speculative asset?

Andreas: Some people have started to accept Bitcoin as a medium of exchange. However, due to its high volatility and variability, Bitcoin's exchange properties can only be used in the financial sector, where there are many problems with existing methods of capital transactions.

For example, cross-border transactions are slow, costly, and involve various security risks, counterparty risks, transaction delays, etc. In comparison, Bitcoin performs better in this area.

As Bitcoin technology develops, its market liquidity will become stronger, volatility will decrease, and the emergence of new applications will become possible.

Q: Where does the value of Bitcoin come from?

Andreas: One of the reasons why people don’t understand the value of Bitcoin is that they don’t understand the value of money at all. The rupee in your hand has value not because of the promise of the Reserve Bank of India (RBI) or the government’s endorsement.

It is the Indian people who believe in and give value to the rupee and use it in their daily lives.

Therefore, even if the central bank broke its promise (demonetization in India), it only damaged the value of the rupee, but did not cause it to return to zero.

If the value of the rupee depends entirely on the government's promise, then once they claim that a certain denomination of rupees is worth zero, this part of the rupee should have no exchange value. But in fact, the government's statement only caused the rupee to lose 15% to 20%, and people were still willing to accept the old notes. The remaining 85% of the value of the old notes proves that the value of currency is not determined by the government, but by the people.

So where does the value of Bitcoin come from? It comes from everyone on the Internet. They share the same position as you. They believe in Bitcoin because they firmly believe that this technology will not be arbitrarily changed, and the number of Bitcoins issued will not be increased at will. It brings extremely high efficiency to cross-border transactions. Those who want to own Bitcoin are willing to exchange products and services. This is the source of Bitcoin's value, and this is faith.

This is a fundamental problem because fiat currencies usually have the image of the queen, the king or the head of state printed on them, and we usually think that these images give the fiat currency its value, but this idea is wrong. However, economists can understand this problem, but ordinary people cannot.

Bitcoin represents private money; it represents the idea that we can use it without a leader, monarch or prime minister. We can use mathematical methods and the Internet to develop a currency with the same properties (portability, interchangeability, unforgeability and security) to ensure the efficiency of money in digital form.