Bitcoin will be king for a long time

[Author's Note: This article is a draft collected by the editorial board of "How to Invest in Digital Currency". In order to ensure the quality of the final book, it is provided to Babbitt for review by friends in the cryptocurrency circle and readers. We hope that everyone will give us advice and put forward various criticisms, improvements, and suggestions, so as to play the role of collective wisdom in creating classics in the decentralized era.]

This article conveys to investors that the birth and development of digital currency is a historical inevitability, and recommends that everyone recognize the complementary coexistence of Bitcoin and competing currencies, and proposes the concepts of public currency, central bank currency and other currencies. This inevitably gives investors the impression that Bitcoin is only a relatively good investment option. This is somewhat blasphemous to Bitcoin's status as the leader. Therefore, an article "First impression, long-term king" is added to remind investors to keep the flag in their hearts and only use Bitcoin to observe the digital currency industry.

20 days after the author completed the first draft, Bitcoin really chose to break upward and set a new high of 3,969 yuan since 2014. The currency circle immediately became boiling, and people were busy looking for any reason for the rise of Bitcoin. However, everything was as expected. If we do not establish the concept of Bitcoin "first-come, long-term king" and plan in advance, it will be too late to envy it when it goes up.

1. The environment where value is created through transactions in a decentralized mechanism no longer exists

The biggest innovation of digital currency is the credit mechanism verified by the decentralized distributed ledger without the need for third-party authentication. The essence of the decentralized feature is that someone designed it, but no one is responsible for its promotion and survival. Excessive promotion must be for the purpose of centralized interests. It is precisely because there is no motivation and reason for promotion that Bitcoin has created a unique value vacuum and ideal pure state in human history.

Bitcoin had no value in its early days, and few people promoted it with the purpose of expected value. Naturally, there was no human manipulation or monopoly. Its growth further demonstrated its original vitality - from the hobbies and exchanges of computer cryptographers, it spread to society and gradually gave birth to its value as a medium of exchange, and eventually became a real currency capable of storing public value.

When Bitcoin was born in 2009, few people knew about it and there was no demand for transactions. It was not until a year later that the first application of exchanging 10,000 Bitcoins for a $25 pizza coupon appeared. Before that, it had always been a digital toy that anyone who understood blockchain technology could easily obtain through mining. This kind of thing with no threshold setting is the ideal state for creating fair exchange.

However, since 2010, because the whole society has value expectations for digital currency, in the absence of more requirements for technology and credit costs, the motivation for creating and issuing a new currency has been motivated by selfish desires for value. Greed, manipulation, pre-mining, setting up mechanisms that are beneficial to the initiator, etc., will affect the fairness, decentralization, and universality of the currency itself, and its trustworthiness will always be lower than that of Bitcoin.

As the concept of digital currency takes root in society, especially with the price of Bitcoin stabilizing at over 2,000 and its market value reaching 50 billion, the society's expectations of the value of digital currency continue to rise. If a new coin is issued and the price is slowly accepted by society from 0, the conditions for maintaining the fairness of chip distribution and the credibility of being unmanipulated will no longer be met. The credit system will no longer be established, and it will never be able to have the function of a public currency. From this point of view, Bitcoin's first-mover advantage will always be the basis for its long-term dominance.

2. Bitcoin’s blockchain protocol mechanism is still the most rigorous and excellent

Bitcoin has been around for 7 years and has always been in the spotlight of the public. There are always questions and bottlenecks, but it has never lost its credibility. It has perfect respect for a constant total amount and decentralization, and maintains a self-closed-loop system of blockchain ledger records through mining rewards based on the POW proof-of-work mechanism. All of this demonstrates its extremely tenacious vitality, similar to the self-nutrition chain of organic matter. It is difficult to find such a perfect protocol mechanism in the world that was created in one fell swoop.

It is Bitcoin's strict protocol mechanism that ensures a self-confidence system that does not require third-party verification, which makes it truly capable of storing value. Although it has been criticized for its long blockchain confirmation time, small data processing capacity, and large waste of social resources in mining, perhaps it is precisely these value attachments that make it more of an international stored-value currency?

More importantly, the issuance of new coins has sprung up like mushrooms after a rain, but the breakthrough in the strictness, innovation and advancement of the protocol mechanism is very small. Only the total issuance of Dogecoin has increased from 21 million to 100 billion, which makes the coin price very low and the confirmation time short, adapting to the birth of micro-payments and rewards, charity, and community culture, and forming a certain complementary relationship with Bitcoin; the total amount is not limited, and after mining 100 billion, it maintains a moderate inflation of 5 billion per year, solving the technical bottleneck of the blockchain's permanent and continuous recording of the general ledger. In addition, no other currency is comparable, which has created Bitcoin's unshakable king status.

The author has made a nearly perfect inference about the Bitcoin protocol system: it is hard to imagine how one person could have done such a large-scale monetary system experiment with such strict predictions and settings from the beginning? The initiator "Satoshi Nakamoto" must have been a large team of elites who are proficient in government functions, cryptography, sociology, finance, and computer experts. Before they announced the date of mining in 2009, they must have gone through years of testing and failure to come up with the first version of the Bitcoin system. Recently, Craig Wright from Australia pretended to be Satoshi Nakamoto. He can only be said to be a naive, ridiculous and whimsical technical fool who does not understand the power of Bitcoin itself.

3. The currency issuing and operating organization spontaneously constructed by Bitcoin has become the largest financial empire

In our understanding of the value of Bitcoin, we are always accustomed to opening the trading platform software to look at its K-line and price trends, and we basically have a narrow understanding that its current price is 2,800 yuan and its market value is more than 50 billion yuan. This is its value!

In fact, ever since the birth of the monetary system, the issuance and operation of transaction currency has itself been a huge social project, and has even become the biggest pillar of government finances, just like the RMB operating system, which must include the cost of printing and circulation of banknotes, the entire banking operating system, the entire amount of broad money, all business outlets, and the total labor of all bank employees; if we regard the Bitcoin credit system as a whole as an institution that operates, issues, and exchanges currency, then all Bitcoin miners' hardware assets, government and private research and investment, social strategic or venture capital, the labor of investment operators, and all private investors and speculators will become the assets of the "Bitcoin operating institution." This is unimaginable, and has long exceeded hundreds of billions, making it a behemoth financial empire.

Putting aside the currencies that falsify transaction volumes and defraud money through centralized crowdfunding models, the market value and social assets of Litecoin, Dogecoin and all the niche currencies in the public currency cannot be compared with the size of Bitcoin. It is no wonder that Bitcoin has billions of transactions every day, while other currencies have only hundreds of thousands of transactions when they are in the doldrums. As a benchmark currency system aimed at establishing an international reserve currency, there needs to be competition, but not too many varieties. This will lead to the Matthew effect of seizing the initiative and the strong getting stronger. It seems that Bitcoin is destined to be only a distant prospect and difficult to surpass.

4. Natural Law Rewards Digital Currency Patent Owners

Regardless of whether the Bitcoin blockchain distributed ledger verifies the credit system, or whether it was developed by an individual or a team, its patent for verifying credit on the blockchain and distributed ledger, using timestamps to ensure that the original data cannot be changed, and incentivizing miners to ensure continuous recording of the ledger to form a self-circulating system is a very epoch-making innovation, and has been proven through 7 years of history to be a major financial invention that changed the course of human history.

The laws of nature have always been fair. They call on the whole society to use a default order to guarantee rewards for the original inventors. Because the Bitcoin protocol system is almost perfect, most of the subsequent digital currencies are imitations and moderate changes based on the Bitcoin ideological system, and none of them are major breakthroughs or innovations. Bitcoin has already exerted its patent influence and authority to the extreme. If this is the case, allowing the preconceived Bitcoin to dominate for a long time is completely the call of the laws of nature!

5. Bitcoin has become the credit foundation on which the entire digital currency ecosystem relies

No matter how ideal is Ripple, "the world's first open payment network that can transfer any currency, fast, convenient and low-cost"? BitShares, "a financial service platform and development platform based on blockchain technology, on which any individual and institution can freely transfer, borrow, trade, issue assets and issue their own smart currency, futures products, etc." [How do you view Ethereum and THE DAO as both BitShares subsidiary models]? How rational and thorough is Dash's realization of anarchist anonymity? For investors with real money and risk awareness, holding Bitcoin is relatively safe at any time, because its seven-year history and pure decentralized distributed ledger system have never had any loopholes, while buying any other innovative coins or copycat coins is inevitably uneasy, and the root of all this comes from the word "trust".

I have been puzzled. In the 5,000-year history of human civilization, Bitcoin is the first to use "thorough, mathematical, encrypted, distributed, blockchain technology to solve the trust problem in a decentralized way", handing over the monetary credit that was previously solved by centralized collectives and sovereign states to the trust of the public around the world. This concept has given birth to a nearly perfect international reserve currency - Bitcoin. But why has the sacred principle of "decentralization" been trampled by Ripple, BitShares, Ethereum, Dash, Yuanbao, and all innovative currencies with "centralized tendencies" before Bitcoin has matured and become universal? The "Ether system" has repeatedly planned crowdfunding to raise money, especially the recent panic of THE DAO, which has turned a "decentralized world revolution" that changed the course of human history into a conspiracy by individual centralized organizations or teams to rob global digital currency participants using "blockchain technology will change the way human society survives", "decentralized autonomous organizations and decision-making bodies are the ideal system", and "smart contracts control the future world". Alas, it is essentially just four words "greed + money", so I won't curse it here.

Fortunately, as global governments, finance, and venture capital are about to blow up the blockchain bubble, Bitcoin's price has chosen to break upwards as global investors' spontaneous game and the halving of mining rewards have a significant impact on the entire industry. The king has returned, and the entire currency circle has finally begun to rethink all the money-making events initiated by all "centralized" organizations. There is also a trend: to use side chain applications, smart contract binding and other forms of development to try to establish a connection with the Bitcoin blockchain! Because only Bitcoin's mining power is easily rivaled by non-sovereign government forces, and has been deeply rooted in every corner of the world. For example, countless cheap small power stations in remote mountain valleys in southwest China and Inner Mongolia have become the components of the Bitcoin ecological chain. From a humanitarian perspective, sovereign governments can only gradually benefit these areas, but cannot prohibit the electricity price benefits that have been obtained in backward areas. The credit of Bitcoin has been carefully cared for by people all over the world, and it has become the foundation for the survival of the entire digital currency ecosystem.

There are many reasons why Bitcoin will be king for a long time because of its preconceived advantages. Due to the limited space, I only focus on the above five points, but this is enough, isn’t it? For a long time, before the social development has another substantial change in the demand for the monetary system, I firmly believe in this view.