Why is Bitcoin, which was created by blockchain, so popular?

Cai Enze

On June 23, the US Bitcoin startup Circle announced that it had received $60 million in Series D financing led by a Chinese consortium, led by IDG China, followed by Baidu, CICC Jiazi, Everbright Investment, Wanxiang and CreditEase, with participation from other US capital.

In recent years, there have been many technological breakthroughs in the field of global financial innovation. Blockchain technology is one of the most important ones. It has spawned Bitcoin, which has caused great controversy but is still being used. Blockchain is similar to a database, with the characteristics of decentralization, openness, autonomy, information immutability and anonymity, so it helps to form digital assets and give rise to related storage, transfer and payment needs. In China, this year, while Bitcoin has been hyped up by the market, blockchain concept stocks have also been very popular. From mid-May to now, blockchain concept stocks have almost all been in the red. The blockchain technology, which is gradually entering the "trend", is attracting more and more gold diggers.

However, the rapid development of Bitcoin has caused people to think about whether virtual currency is a real currency. In early 2014, the world's largest Bitcoin trading platform Mt.Gox in Tokyo suddenly closed down, which once made people lose hope in Bitcoin. But just over two years later, people are chasing Bitcoin again, believing that the emergence of Bitcoin is a huge challenge to the current monetary system, and some even call it "the future of gold."

In China, regulators are very wary of the risks of Bitcoin. As early as December 2013, the central bank, the Ministry of Industry and Information Technology, the China Banking Regulatory Commission, the China Securities Regulatory Commission, and the China Insurance Regulatory Commission jointly issued the "Notice on Preventing Bitcoin Risks", which clearly pointed out that Bitcoin is not a currency and should not be circulated and used as a currency in the market. Ordinary people have the freedom to participate on the premise of assuming their own risks, and financial institutions and payment institutions are not allowed to price products or services in Bitcoin.

Perhaps, there is a certain rationality in its existence. Bitcoin is not a currency, but it is still popular. There must be a logic behind its survival.

On November 1, 2008, a computer geek with the pseudonym "Satoshi Nakamoto" published a paper on a secret cryptography forum, proposing the concept of Bitcoin for the first time. Bitcoin is a virtual currency generated based on a variety of computer encryption technologies, known as "artificial gold", which can be widely circulated and preserved for a long time. To own Bitcoin, you must "mine". The so-called "mining" is to continuously operate high-performance computer equipment nicknamed "mining machines" based on a set of cryptographic programming to generate Bitcoin through complex algorithms.

In addition to the five characteristics of physical currency, namely, means of payment, means of circulation, value scale, world currency and means of storage, Bitcoin also has its own characteristics: decentralization, no legally authorized issuer; global circulation, can be traded on any computer connected to the Internet; privacy, can be isolated and stored in any storage medium; limited total amount, scarce resources. It is precisely these characteristics of Bitcoin that make it the fastest-growing and most widely influential among several virtual currencies, and its scope of use has penetrated from the Internet to the real world. A car owner in Texas, the United States, sold his Porsche sedan for 300 Bitcoins. Users can also use Bitcoin to stay at Howard Johnson Hotel chain, buy socks and order pizza on certain consumer websites, and of course, they can also exchange Bitcoin for cash on Bitcoin exchange websites.

The most direct reason for the current rise in Bitcoin prices is that Bitcoin's production will be halved once every four years in July, which is generally considered to be a positive factor, and this positive factor has been digested in advance by the market. Looking at the development of Bitcoin around the world, in the past year, digital currency and the blockchain technology behind Bitcoin have been widely recognized around the world. Countries have enacted legislation and supervision on Bitcoin, which has cast a layer of mystery on Bitcoin and objectively popularized Bitcoin to more people. In addition, as a market-oriented product, it is normal for Bitcoin prices to fluctuate, and the sudden surge is also related to the investment behavior of some users. Bitcoin has risen by more than 250% since September last year, and the total market value of Bitcoin has exceeded US$3 billion. At present, the main driving force of this virtual currency comes from Chinese buyers.

It is not worthy of its reputation. The current popularity of Bitcoin is limited to the investment speculation level. Simply put, it is a game of passing the parcel. The Chinese consortium led the $60 million D round of financing for the US Bitcoin startup Sci-Tech. In fact, it is more about Sci-Tech's blockchain technology, which is a commanding height of Internet database technology. In fact, the concept of non-nationalization of currency embodied by Bitcoin was proposed by the famous British economist Hayek as early as the 1970s, but practice has proved that this concept is nothing more than an economic utopian thought. From the history of currency development and evolution, it can be seen that currency is a concentrated reflection of the characteristics of economic and social development at a certain stage, and national credit is the basis for the issuance of modern currency. Bitcoin does not have national credit at all, which is its inherent "hard injury", so it is impossible to replace the existing national currency. In addition, Bitcoin has no legal compensation and compulsory nature, and its circulation range is limited and unstable. Bitcoin is also highly substitutable, and it is difficult to serve as a general equivalent. No matter how sophisticated the blockchain technology is, it is impossible to create a national currency. The general public investors should not follow suit.