The final success of Bitcoin will be achieved by the loyal Bitcoin fans themselves

Part I: Preface

This article is not specifically targeting @陈思进. Many newcomers may have the same questions and doubts about Bitcoin. His article below lists 13 points, which fully explains the common misunderstandings about Bitcoin. Therefore, this article quotes and comments on them one by one.

Recently, Mr. Chen Sijin, a well-known Bitcoin hater, published the following article on 2017-01-05 20:19:53 after the price of Bitcoin broke its historical high. There must be other reasons. Coincidentally, the price of Bitcoin plummeted around the time of his post, from a high of 8,888 yuan to 6,000 yuan, a drop of more than 30%. Although 30% is weak in the history of Bitcoin's sharp rise and fall on June 8, it is still rare to have such a large drop in just a few hours. It is necessary to study this article.

The Paradox of Bitcoin: Bitcoin fans themselves will be the ones who will destroy Bitcoin in the end

Times have changed. I never thought that nowadays, almost all Bitcoin transactions are in the hands of Chinese people. The top three Bitcoin trading platforms in China alone account for 90% of the global Bitcoin transaction volume. In other words, Bitcoin has become the Bitcoin of Chinese people and a tool for Chinese people to transfer assets (while the remaining very small part of overseas transactions is almost all used for dirty activities such as pornography, gambling, drugs, smuggling, money laundering, etc.) Let me repost an old article I wrote a few years ago, "The Bitcoin fans will eventually destroy Bitcoin" to warn Bitcoin fans again. It seems that the Chinese government will soon take a heavy hand on Bitcoin. Be careful and stop when you are ahead! As for whether Bitcoin will revive or have a last gasp, we will wait and see.

Bite Sauce Review

Bitcoin, like the Internet, is a global asset and does not belong to any country. Bitcoin trading is only a small aspect of Bitcoin. Foreign trading platforms generally charge transaction fees, while most domestic Bitcoin trading platforms have zero transaction fees. The transaction volume without transaction fees can be high-frequency trading, and the transaction volume ratio is not real.

As for the specific physical merchants applying Bitcoin, see the statistics, most of them are distributed in Europe, America and Australia. In China, there are only a few that cannot be circulated as currency in the market due to the restrictions of the five ministries and commissions, and most of them are distributed in Hong Kong. In addition, not all Bitcoin applications are gray applications. Companies like Microsoft, Dell, Steam platform, Newegg.com, etc. all accept Bitcoin payments. Our Chinese attitude is that as a specific virtual commodity, it is allowed to be freely held and traded at your own risk. To put it another way, even if it is completely banned, it will not affect the intrinsic value of Bitcoin. Google has left China and FaceBook has not been able to enter China, but they are still top companies in the world. More and more global Bitcoin fans will make Bitcoin a success.

Part II: Point-by-point refutation

In the end, it will be the fans themselves who will destroy Bitcoin. In fact, the situation of Bitcoin is very clear: the higher the price, the more people will hoard Bitcoin for a long time, which will make the liquidity chips less and less, and the further away from its original intention - the function of transaction medium. As a result, its bubble will become bigger. It is obvious that it has fallen into this vicious circle. In the end, Bitcoin is likely to become like an antique, with only collection value, no circulation value, and nothing to do with the so-called currency function! But once it loses its currency function, what is the use of Bitcoin? ! Conclusion: In the end, it is not others who destroy Bitcoin, but those loyal Bitcoin fans!

Bite Sauce Review

Bitcoin's "original intention - a medium of exchange"? This is just the original intention imagined by Chen Sijin himself. Satoshi Nakamoto and many Bitcoin fans' "original intention" for Bitcoin is not as simple as positioning it as a "medium of exchange". It is more positioned as a means of wealth storage to avoid over-issuance and dilution. And the scarcity with an upper limit, coupled with the recognition of more and more Bitcoin fans, Bitcoin has the function of wealth preservation and appreciation. As Chen Sijin said, "The higher the price goes, the more people will hoard the currency for a long time, making the liquidity chips less and less", and the fewer Bitcoins are circulating in the market, the more supply will be in short supply and the price of the currency will rise. The more Bitcoin fans there are, the higher the value of Bitcoin for storing value. 5.6 Bite Jiang's three core uses will help you understand why Bitcoin is worth thousands

Take a closer look at Satoshi Nakamoto’s message in the Genesis Block:
“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks” — Satoshi Nakamoto

(I) In the eyes of fervent believers, Bitcoin is interpreting Hayek's dream of "free money". Perhaps it can really fulfill some of Hayek's dreams, but at least it has to wait until the bubble bursts. Bitcoin was born in 2009, and many institutions currently claim to accept Bitcoin for payment. In the field of currency, credibility is king. On the other hand, even if the currency is issued by the government, the credibility may not be strong;

Bite Jiang's rebuttal : Bitcoin has experienced many surges and plunges. Amid the twists and turns, Bitcoin is growing at a very fast pace. Bitcoin is a large electronic cash ecosystem. The currency settlement payment that Chen Sijin sees is only one aspect of Bitcoin payment, but not all. Only credit fiat currency requires the credibility of the issuer, while gold, as a currency in ancient times, does not require the credit guarantee of any person or institution, as long as everyone agrees on its value, and the same is true for Bitcoin.

(ii) Bitcoin has obviously gained a certain degree of credibility. It relies on people's worship of technology, resonance with the spirit of the Internet, belief in liberalism, and aversion to government authority. This credibility is the basis for the existence of Bitcoin. However, the current Bitcoin price has soared, and it has obviously formed a huge bubble. It is precisely the speculators who have pulled Bitcoin away from the track of trading medium and put it on the track of hoarding for price appreciation;

Bite Jiang's rebuttal 2 <br/>Some Bitcoin haters deliberately put Bitcoin in opposition to the government. In fact, Bitcoin has never been hostile to government authority. Bitcoin trading platforms have always cooperated with government supervision, such as real-name authentication and anti-money laundering review. New York, USA, has also issued a Bitcoin license (BitLicense) for standardized supervision. In addition, based on the openness and transparency of the Bitcoin blockchain, if Bitcoin is used, it will not be possible to evade taxes, which is conducive to increasing national tax revenue. "Worship of technology, resonance with the spirit of the Internet, and belief in liberalism" can attract more and more people to become Bitcoin fans. With the increase in fans and hoarding of coins, Bitcoin has entered a rising track in the macro sense, which is only the correct track that Bitcoin hopes to use for value storage, and the track of only being a trading medium is a wrong path.

(III) The further Bitcoin is from the function of a real transaction medium, the bigger its bubble will be. Especially after Bitcoin entered China, it was sought after by a group of speculators, and a game of passing the parcel has been formed. Can the price of Bitcoin rise to the sky? Obviously not! Even if we do not consider risks such as government policies, from the perspective of pure monetary principles, its inherent paradox also determines that it has huge price risks;

Bite Jiang's rebuttal three <br/>The bigger the gap between Bitcoin price and Bitcoin value, the bigger the bubble, and the source of Bitcoin's value is fan loyalty and applications, not transaction medium. The more fans who recognize the value of Bitcoin and the more coin applications, the higher the value of Bitcoin. This has no direct relationship with whether Bitcoin can be used as a transaction medium or whether it can have a huge amount of on-chain transactions. If it cannot be used as a transaction medium, will there be no more and more fans? Of course not. As long as the total amount of Bitcoin is maintained unchanged and the decentralization of all nodes in the Bitcoin network is maintained, more and more people who are optimistic about the value of Bitcoin storage will become Bitcoin fans. With more Bitcoin fans, some coin applications can be better promoted, the value of Bitcoin will increase, and the price will naturally increase, rather than a bubble. The price of the coin can continue to rise until almost everyone in the world becomes a Bitcoin fan, and then stabilize.

(IV) The soaring price of Bitcoin has triggered an essential paradox: it has eliminated its own monetary attributes, thereby negating its own survival value. The fundamental value of Bitcoin is that it has monetary attributes, namely, the function of transaction payment. It is this monetary attribute that has triggered everyone's frenzy of buying. However, as the price soars higher and higher, people have been hoarding it instead of using it for transaction payment, and Bitcoin has gradually lost its transaction payment function;

Bite sauce rebuttal 4

The survival value of Bitcoin does not lie in the transaction and payment function. What attracts people to buy Bitcoin is not that Bitcoin can be traded and paid, especially in China, due to restrictions, there are very few places that can accept Bitcoin. Bitcoin has the characteristics of no over-issuance and decentralized storage of wealth, especially the "hoarding channel for price increase" is what attracts people to buy it crazily. However, transaction payment circulation does not have enough motivation to attract people to buy. For example, the euro can be traded and paid in Europe, but unless you travel to Europe, who will go to exchange euros crazily? In addition, do people who have exchanged dollars want to trade and pay in the United States? More people think that the United States can have less over-issuance and the dollar can be more valuable, so they exchange it. Bitcoin only has 21 million BTC, and there is no over-issuance. As for whether it can be traded and paid, when more and more Bitcoin fans recognize it and hoard it, payment will be a natural result. Even if it cannot be traded daily, it can be traded in large amounts.

(V) Now many institutions, especially Internet companies, are chasing fashion and claiming to accept Bitcoin payments. But it is actually difficult to complete specific transactions. At what price can Bitcoin be paid? Due to the volatility of prices, this problem cannot be solved. Once the currency attribute is eliminated, Bitcoin will be worthless;

Bite Jiang's rebuttal five <br/>Bitcoin has a third-party Bitcoin platform as an intermediary to guarantee transactions, such as the Bitpay platform invested by Li Ka-shing, and Coinbase. The fluctuation of the Bitcoin price can be borne by the third-party platform. The price can be marked as legal currency, and the amount of Bitcoin is calculated according to the real-time exchange rate when paying. Chen Sijin should learn more about it. At present, most Bitcoin payments are implemented in this way. For example, if you use Bitcoin to recharge 100 yuan of mobile phone bills, if the price of the currency is 8,000 yuan, then you pay 0.0125 BTC, and if the price fluctuates to 5,000 yuan, then you can pay 0.02 BTC. A payment usually takes about ten minutes, so as long as the currency price does not fluctuate violently within ten minutes, there is no problem. The amount of currency to be paid is calculated according to the current currency price. If there are some fluctuations, you may lose money but you may also make money, and then you can hedge in the long run. In addition, a third-party platform can act as an intermediary and fully bear the volatility risk by charging a certain handling fee (generally 1%, which is much lower than credit cards).

(VI) The second paradox of Bitcoin is that although it does not suffer from inflation, if it can really be widely used, it will inevitably suffer from deflation. Bitcoin fans believe that the government's unlimited issuance of currency will cause inflation and exploit the people with seigniorage, while the total amount of Bitcoin is limited and cannot be over-issued, so there is no such disadvantage. It is very true, but this is a case of throwing the baby out with the bathwater! From the perspective of limited total amount, Bitcoin is very similar to digital gold...

Bite Jiang's rebuttal six <br/>Bitcoin is a new thing, with its own new features and its own new classification of "cryptocurrency". There is no need to immediately classify it as "currency" or "precious metal". The total amount of Bitcoin is fixed at 21 million BTC, which means that there will be no inflation or over-issuance, nor will there be deflation or reduction. In addition, Bitcoin and credit currency will coexist for a long time, rather than replacing each other. Therefore, the so-called deflationary drawbacks can be solved by the over-issuance of coexisting credit currencies, not just Bitcoin, but multiple currencies may form a currency ecosystem together. Aren't gold and credit currencies coexisting for a long time?

(VII) Gold reserves are also limited. Currency was linked to gold for a hundred years. Before the First World War, productivity rose rapidly and business expanded rapidly, but gold could not increase significantly. This gap became the seed of the collapse of the gold standard. The upper limit of the number of issuances will severely restrict the monetary function of Bitcoin, which also makes it impossible for it to become a real mainstream currency in the contemporary social economy. It can only be a marginal role. If the gold standard collapses, then Bitcoin will collapse as well;

Bite's rebuttal seven <br/>Gold has a history of thousands of years as a currency. After the collapse of the gold standard, countries started a crazy competition to print money. It was the United States's looting of the world's wealth. Important materials from around the world flowed into the United States, and what they got in return were colorful and depreciating pieces of paper. In fact, if the gold standard had not collapsed, the economy might have developed better and more fairly. Note that it was the economic explosion brought about by the explosion of science and technology, not the abolition of the gold standard. In the future, there will be no mainstream currency in the world. Instead, each country and each sub-sector will have its own currency. Bitcoin will become the anchor of currency and the intermediary for exchange between currencies. The gold standard collapsed, but gold did not collapse. Instead, it has continued to rise since then. See the gold price trend chart since 2000 in the figure below, reaching more than $1,000. The Bitcoin standard may not be implemented, and even if it is implemented, it may not collapse. Even if the Bitcoin standard collapses, Bitcoin will not collapse.

(VIII) This type of virtual currency claims to be decentralized, which is its strength, but also its weakness. The lack of an issuing entity means the lack of a responsible entity. If legal currency has adverse consequences due to its issuance, the government will be responsible, but virtual currency cannot do this. In fact, these virtual currencies are only valuable when someone is willing to take over. Once the game of passing the parcel stops, all you have in your hands is a pile of air.

Bite Jiang's rebuttal eight <br/>There are generally only two "bad consequences" of currency issuance: one is inflation and depreciation caused by over-issuance by the issuer, and the other is depreciation caused by rampant counterfeit money due to poor anti-counterfeiting. Gold is issued by nature to avoid over-issuance, and its physical and chemical properties ensure anti-counterfeiting. Therefore, gold is naturally a currency, a legal credit currency, and the government guarantees that it will not be over-issued in large quantities and combat counterfeiting. Bitcoin relies on consensus protocols to achieve a maximum limit of 21 million BTC without over-issuance, and relies on asymmetric encryption and blockchain to completely eliminate counterfeiting. Bitcoin is decentralized like gold, and does not rely on the credit of people or institutions to ensure that no adverse consequences will occur, so it can naturally be used as a currency. As for the fact that it has no value if no one is willing to take it over, in fact, all currencies are the same. Which currency will still have value when no one is willing to take it over? More and more Bitcoin fans will take over Bitcoin. If someone gives me 100 Bitcoins, I will take them, as long as the fee is not high.

(IX) According to Bitcoin Average data, China currently accounts for 80% of the global Bitcoin market! This surge in demand has also made Bitcoin China surpass Mt. Gox to become the world's largest Bitcoin exchange. Although the Chinese government has not yet banned this virtual currency, it is only a matter of time before the Chinese government intervenes in this field. Therefore, the future of Bitcoin depends on the attitude of the Chinese government;

Bite Jiang's rebuttal 9 <br/>Chinese Bitcoin exchanges are all free of transaction fees, while most foreign exchanges charge transaction fees. Without transaction fees, trading platforms or users can increase transaction volume through high-frequency trading, and the transaction volume ratio has no reference value at all. Bitcoin is global, and the attitude of the Chinese government can only affect the future of Bitcoin in China, but not the future of Bitcoin. And our five ministries and commissions have already expressed their position in 2013, allowing free holding and trading.

The Central Bank and five other ministries and commissions issued a notice on preventing Bitcoin risks.

December 5, 2013

The Notice clarifies the nature of Bitcoin, stating that Bitcoin is not issued by monetary authorities, does not have monetary attributes such as legal compensation and compulsion, and is not a real currency. In terms of nature, Bitcoin is a specific virtual commodity that does not have the same legal status as currency and cannot and should not be circulated and used as currency in the market. However, as a commodity trading behavior on the Internet, ordinary people have the freedom to participate in Bitcoin transactions at their own risk.

(10) The third paradox of Bitcoin is that it is called "limited", but in fact it cannot be limited. "Limited" gives life to Bitcoin, but many imitators are emerging. According to media reports, there are more than 400 "imitation Bitcoin" in the world, including Litecoin, Coordinatecoin, Firefly Coin, Zeus Coin, and even Dogecoin and Pig Coin;

Bite Jiang's refutation ten <br/>Bitcoin is open source, and open source code certainly does not worry about "copycats". Bitcoin is not afraid of the emergence of competing coins, they are not Bitcoin, just like the emergence of other metals, which will not affect the total amount of gold. For details, see the following encrypted electronic currency rankings.

There are already 713 currencies included, and there are many more that are not included. At the time of writing, the total market value of circulation is $17.087 billion, while the market value of Bitcoin is $14.704 billion, accounting for 86%. Therefore, it is difficult for new currencies to pose a threat to Bitcoin's position in the encrypted electronic currency. The more competing coins there are, the more solid Bitcoin's position is. Competitive coins compete with each other, and do not constitute competition to Bitcoin. There may be some coins that are positioned in niche areas, such as Dogecoin, which is positioned for small rewards, and some coins that are positioned for high anonymity. But they are only a supplement to Bitcoin, just like silver and copper coins supplement gold. In addition, Bitcoin is also developing side chain technology, which may be able to integrate these coins through side chains, but the 21 million BTC upper limit of the main chain will not change and will not have any impact.

(XI) It is not difficult to imagine that after the issuance of various imitation Bitcoins is roughly stable, the exchange rates between them will be very chaotic in the early stage, but arbitrageurs will then even out the price difference. At that time, they will essentially become the same currency, just with different names. From this perspective, there is no real upper limit on the number of Bitcoins, and the limit on the total number of issuances does not constitute the core reason why it is worth collecting;

Bite Jiang's 11th rebuttal <br/>Facts speak louder than words. The competing coins that imitate Bitcoin have no price difference elimination and have always had a fluctuating exchange rate. Even if the exchange rate is fixed, it is like the paper currency based on gold standard, becoming a competing coin or side chain coin based on Bitcoin standard, but they have not changed the essence of Bitcoin's upper limit of 21 million BTC. Just like the emergence of gold standard paper currency, it has not increased the total amount of gold. Physical gold is worth collecting, and Bitcoin on the Bitcoin main chain is also worth collecting, rather than collecting gold standard paper currency, paper gold or other encrypted electronic coins with a fixed exchange rate based on Bitcoin standard.

12. Denationalization of currency is an old dream of liberal economic thinkers. But as long as the core organizer of human life is still the government, this dream will be difficult to take root. In the foreseeable future, private currency can only be marginal and entertaining. However, the existence of Bitcoin still has positive significance from a technical perspective. For example, if its technology is popularized, it can improve transaction efficiency;

Bite Jiang's rebuttal 12 <br/>The denationalization of currency has actually existed for a long time, such as the shells of primitive people and later gold. In fact, even in the early days of paper money, paper money was issued by major money houses or banks. It was only in the past few hundred years that it was taken over by the state to issue. Bitcoin is just a return to the decentralization of the essence of currency. Bitcoin is not issued by the state, but it is not a private currency either. Bitcoin from a technical perspective is blockchain technology. The concept of "blockchain" exploded in 2016, and there are indeed many application plans. In fact, the two are the same thing. The currency circle is the chain circle, and the chain circle is the currency circle, that is, they belong to the same currency and chain circle.

(End of Thirteen) In short, Bitcoin has obviously become a topic in the financial field, just like real estate and stock speculation, "How many Bitcoins do you have? Do you continue to hold or sell?" has become a standard psychological dialogue for speculators. If you don't have enough psychological quality, and you think about your loved ones less than you do about Bitcoin, then you'd better not get involved, and think more about your loved ones.

Before the bubble burst, all we heard were stories about making money, getting rich, and buying houses, and there were as many stories as there were about losing love because of not having money to buy houses. According to gravity, the bubble will either continue to rise or suddenly fall, and because of human timidity and fear, there is no such thing as a soft landing.

How true Shakespeare was, Hell is empty, all the devils are here! Written in Toronto in early January 2014

Bite Jiang's refutation thirteen <br/>For Bitcoin fans who really understand the currency, there is no so-called "continue to hold or sell?" The so-called cashing in is just to withdraw the currency from the trading platform to your own cold storage address. In the eyes of Bitcoin fans, credit fiat currency is money, and Bitcoin is also money. Real Bitcoin fans are never afraid of Bitcoin's plunge. A drop is an opportunity to get more coins. Instead, they are a little worried about continued rapid increases. There is no so-called hard landing and the opportunity to buy coins at a low price. The low point of each so-called plunge is often higher than the high point of the last surge.

Part III: Summary

To summarize the three paradoxes mentioned by Chen Sijin:

Paradox 1: As the price of Bitcoin soars, the amount of coins hoarded increases, and the transaction and payment functions weaken, negating the value of the currency itself.

【Correct】The value of Bitcoin lies first in the storage of wealth, and then in trading and circulation. Bitcoin fans hoard coins, reducing the circulation of coins, causing supply to fall short of demand, and thus the price of coins to rise, which is beneficial to the wealth storage value of Bitcoin.

Paradox 2: There is an upper limit on the number of coins issued, which will cause currency deflation and restrict the monetary function of Bitcoin, making it impossible for it to become a truly mainstream currency in the contemporary social economy.

【Correct Argument】In the future, the world's currency will be diversified. It will no longer be the globally recognized gold or the US dollar as the world's currency, but many currencies will coexist. The number of Bitcoins has an upper limit, which will make it an important currency for storing wealth, and the circulation area can be other inflationary legal currencies. Multiple currencies will coexist, so that the economy will not be hindered by deflation.

Paradox 3: Bitcoin is given life by limited supply, but it cannot be limited because many imitators are emerging. After the price ratio between them stabilizes, it is equivalent to unlimited supply.

【Correct】Bitcoin is Bitcoin, and altcoins are altcoins. Just as no other metal can replace gold, no altcoin can replace Bitcoin. No matter how many altcoins there are, they cannot affect the 21 million BTC limit of the Bitcoin main chain.