Why I can hold Bitcoin with peace of mind when Bitcoin exchanges are under policy raids

Chapter 0 Introduction

The policy initiative to "care" about Bitcoin has caused the price to plummet. Last week, the People's Bank of China interviewed three Chinese Bitcoin exchanges. After the news broke, the price of Bitcoin plummeted. Today, relevant Chinese departments formed a joint inspection team to enter two Chinese Bitcoin exchanges, and the price of Bitcoin plummeted again.

Policy uncertainty is a very big risk for Bitcoin prices.

Chapter 1: Government policies are unpredictable

When it comes to investment, systemic risks can often be divided into two categories: market risk and policy risk. Because governments around the world currently do not have a very clear understanding of Bitcoin, policy risks are completely unpredictable. No one can predict what kind of intervention policies the government will introduce. This is a problem that every Bitcoin investor must face.

Many of us who invest in Bitcoin are libertarians or even anarchists. Most of these people don’t like to “meddle in politics.” But the government will take the initiative to “care” about us.

In any country, there is no vacuum of government regulation, especially in the investment field, the power of the regime cannot be ignored. The key to successful investors is to increase certainty and reduce uncertainty. But policy certainty is one of the scarcest things, perhaps even scarcer than 21 million bitcoins. If someone can design a policy coin that is as scarce as policy certainty, it is estimated that it will rise sharply.

Instead of chasing after government regulation news, it is better to accept the reality as soon as possible - policies are unpredictable.

Chapter 2 Hume's Rogue Hypothesis

The thinker Hume made a hypothesis about the government:

“It has been settled as a rule by statesmen, that in designing any system of government, and in determining the several constitutional checks and controls, every man should be regarded as a knave,—as having no other object in all his actions but the pursuit of his own selfish gain.”

Hume assumed that all civil servants were rogues. In fact, there must be some politicians who are not rogues. Hume's assumption was not a malicious speculation, but the purpose of making such an assumption when designing the political system was to establish a reliable prevention mechanism to block the path for civil servants to develop into rogues.

As an investor, Hume's hypothesis is a reasonable assumption for safe investment. Since we have no way of predicting policy directions, we might as well assume the worst about policies and interventions and then make preparations. Only in this way can the harm caused by policy interventions to investments be limited.

Chapter 3 Policy concerns about Bitcoin lead to a sharp drop in prices, which also confirms the rogue hypothesis

I read the news all night tonight, and I didn't find any definite news that was bad for Bitcoin, not a single one. But the market has been scared to death, and it has fallen directly from 6400 to 5100.

This also confirms that a large number of investors directly think of policy intervention in a bad way. No matter whether it is good or bad, they guess it is bad first and rush to run away first.

Chapter 4 Bitcoin is designed with rogue assumptions in mind

In fact, facing this kind of news market, there is no need to worry so much, because Satoshi Nakamoto has deeply understood the true meaning of Hume and directly implanted the rogue hypothesis into Bitcoin in the form of soul.

Bitcoin is decentralized, so there is no central node for you to destroy . If the government wants to destroy Bitcoin, it may only find some scapegoats to kill, such as destroying exchanges. If this is true, of course it will greatly affect the price, but it is essentially impossible to destroy Bitcoin.

Bitcoin is designed as a data structure. The government has no way to ban a data structure. Just like the government cannot ban electromagnetic waves that carry information. Friends who have watched spy dramas must know about radio stations, which are widely used as a tool to spread secrets. Do you think the government has a way to ban radio stations from spreading information? Radio stations send electromagnetic waves that carry a specific data structure. How can you ban it? Do you ban electromagnetic waves? If you have this ability, why don’t you ban the earth’s gravity!

Some say that it is possible to block the flow of Bitcoin within a country by setting up protocol filtering through a national firewall. This is a misunderstanding of the Bitcoin protocol. Only the transaction itself requires a network to be transmitted; a person can hold Bitcoin without a network. Bitcoin transactions are designed to be broadcast publicly over any potentially convenient network without requiring any confidential information, private keys, or passwords. Credit card transactions contain sensitive information and rely on encrypted network connections to transmit information, but Bitcoin transactions can be sent over any network environment. As long as the transaction can reach a Bitcoin node that can broadcast it to the Bitcoin network, it does not matter how the transaction is transmitted to the first node. Bitcoin transactions can therefore be sent to the Bitcoin network over unencrypted networks (such as WiFi, Bluetooth, barcodes, or copying and pasting into a web form). In some extreme cases, a Bitcoin transaction can be transmitted via packet radio, satellite or shortwave, spread spectrum or frequency hopping to avoid detection or jamming of communications. A Bitcoin transaction can even be encoded as an emoticon in a text message and posted to an online forum, or sent as a text message or a Skype chat message. Because Bitcoin turns money into a data structure, it is essentially impossible to prevent anyone from creating and executing Bitcoin transactions.

Bitcoin is not a tool that is naturally conducive to criminals. The reason why the government "cares" about Bitcoin is nothing more than that Bitcoin is used as a tool for money laundering, evading foreign exchange, and gambling. But in fact, this is a misunderstanding of society. The Bitcoin transaction account is a public ledger, and every transaction is open to the entire network. But the personal information behind the transaction is hidden. This design is not conducive to being used as a tool for criminals, because as long as the criminal leaks personal information in any transaction, the blockchain will not let him go, and in theory, all his transactions can be tracked all the way. Before his retirement, Satoshi Nakamoto stood up and spoke to dissuade WikiLeaks from accepting Bitcoin donations, which in fact proved that Satoshi Nakamoto was unwilling to use Bitcoin as a tool to fight against government forces. Therefore, the starting point of the government's "concern" about Bitcoin is difficult to establish. If you don't believe it, just wait and see whether the government can find out whether Chinese people use Bitcoin to launder money and evade foreign exchange.

Chapter 5 Conclusion

Realizing that it is essentially impossible to prevent anyone from creating and executing Bitcoin transactions, perhaps you can feel comfortable holding Bitcoin under the rogue assumption.