Bitcoin's rise needs to be viewed calmly

The rapid development of Bitcoin has triggered people's thinking about whether virtual currency is a real currency. Some people believe that the emergence of Bitcoin is a huge challenge to the current monetary system , and some even call it "the gold of the future."

Sheng Songcheng said that Bitcoin has the characteristics of virtual currency such as no physical form, digital storage and payment . It also has characteristics that traditional virtual currencies do not have : no centralized issuer, limited quantity, complete anonymity, and untraceable transactions.

In fact , judging from the essential characteristics of currency and its development history , virtual currencies represented by Bitcoin are not currencies in essence and it is difficult for them to become currencies.

Over the past five months , the price of Bitcoin has been rising steadily , and the combined increase in the past two weeks has reached 32%, which is the largest weekly increase since the Bitcoin bubble burst in November 2013. The current price of nearly $ 600 per Bitcoin has also hit a new high since July 2014 .

Every time Bitcoin enters the public eye , it is because of a sharp rise in price. On May 29 , the trading price of Bitcoin once soared to $ 599 per Bitcoin , equivalent to RMB 3,944.30 per Bitcoin , a 24- hour increase of 9.41%, marking the third consecutive day of sharp increases.

Blockchain technology boosts Bitcoin price

Sheng Songcheng, director of the Survey and Statistics Department of the People's Bank of China , said that in recent years , virtual currencies born in the Internet world have attracted more and more attention. Among them , Bitcoin, which appeared in 2009 , has developed the fastest and has the most extensive influence . Its scope of use has penetrated from the Internet to the real world.

Bitcoin was first proposed by Japanese Satoshi Nakamoto , with the original intention of being a virtual currency that could be used for legal tender for payment and circulation. However, the reality is quite different . Bitcoin has taken a different path in its development. It has not been accepted as legal tender by regulatory agencies in various countries , nor has it been widely adopted by commercial enterprises in the market for payment and circulation . Instead, it has become widely known as an investment product.

Regarding the current rise of Bitcoin , Li Lin, founder and chairman of China's Bitcoin trading platform Huobi.com, said in an interview with our reporter that the most direct reason is that Bitcoin will soon usher in the once-in-four-year halving of its production in July this year , which is generally considered to be a positive. At the same time , from the fundamentals of Bitcoin's global development , digital currency and the blockchain technology behind Bitcoin have been widely recognized worldwide in the past year , and various countries have also enacted legislation and supervision on Bitcoin , objectively popularizing Bitcoin to a wider group of people , creating a better social environment for the development of Bitcoin.

In addition , Li Lin said that as a market-oriented product , fluctuations in Bitcoin are normal , and the sudden surge is also related to the investment behavior of some users.

The rapid development of Bitcoin has triggered people's thinking about whether virtual currency is a real currency. Some people believe that the emergence of Bitcoin is a huge challenge to the current monetary system , and some even call it "the gold of the future."

Sheng Songcheng said that Bitcoin has the characteristics of virtual currency such as no physical form, digital storage and payment . It also has characteristics that traditional virtual currencies do not have : no centralized issuer, limited quantity, complete anonymity, and untraceable transactions.

"In fact , the concept of denationalization 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 just an economic utopian idea," said Sheng Songcheng.

"In fact , judging from the essential characteristics of currency and its development history , virtual currencies represented by Bitcoin are not currencies in essence and it is difficult for them to become currencies." Sheng Songcheng said that on December 5 , 2013 , the People's Bank of China and five other ministries and commissions jointly issued the "Notice on Preventing Bitcoin Risks" , which pointed out that Bitcoin is a specific virtual commodity , not a real currency.

Bitcoin is not a real currency

Sheng Songcheng said that serving as a medium of exchange for goods is the essential attribute and most basic function of money , and is also a distinctive mark that distinguishes money from other things , especially under the conditions of credit currency. 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.

In addition , Sheng Songcheng emphasized that monetary policy is one of the most important means for the country to regulate the economy. Monetary policy is a series of measures by which the central bank indirectly affects total demand by regulating and controlling money supply, bank credit and market interest rates , so that total demand and total supply tend to be balanced. Changes in money supply have a wide impact on the economy and are closely related to macroeconomic indicators such as prices, income, employment, and economic growth. As Keynes said , "The characteristic of a monetary economy is that in this economic system , changes in people's views on the future can not only affect the direction of employment , but also change the amount of employment."

Sheng Songcheng said that monetary policy, like taxation, police, courts and other state machinery , is the basis for the operation of a modern state and an important part of the state machinery. As long as the social organization form of the state does not undergo fundamental changes , the monetary system based on state credit will always exist.

Therefore , Sheng Songcheng believes that Bitcoin is not a real currency. In addition , Bitcoin has the following disadvantages.

First, Bitcoin lacks the support of national credit and is difficult to perform the function of a commodity exchange medium as a standard currency. First , Bitcoin does not have the value basis as a currency. Bitcoin is a string of codes generated by complex algorithms . Whether it has value and can become a medium of exchange depends entirely on people's trust. Second , Bitcoin has no legal tender and compulsion , and its circulation is limited and unstable. Third , Bitcoin is highly substitutable and it is difficult to serve as a general equivalent.

In general , Bitcoin has neither unique natural properties nor exclusivity or uniqueness granted by law . Therefore, it is easy to be replaced and it is difficult for it to serve as a general equivalent and become a medium of exchange for commodities.

Second, the upper limit of the number scale is set , which is difficult to adapt to the needs of modern economic development. On the one hand , there is a contradiction between the limited number of Bitcoins and the ever-expanding social production and commodity circulation . If it becomes the standard currency , it will inevitably lead to deflation and inhibit economic development. On the other hand , the limited number of Bitcoins greatly reduces the function of Bitcoin as a means of circulation and payment , making it more likely to become an object of speculation rather than a medium of exchange.

Third, there is a lack of a central regulatory mechanism , which is incompatible with the modern credit currency system. Bitcoin has no centralized issuer and is prone to over-hype , leading to excessive price fluctuations. In addition , Bitcoin is not controlled by the monetary authorities and is difficult to play the role of an economic regulator.

Blockchain technology enters the 3.0 era

From a technical perspective , blockchain is the theoretical basis of Bitcoin and the most important innovation that Bitcoin has brought to the world. Since this year , the development and application of blockchain has become increasingly rapid and extensive.

Simply put , blockchain is equivalent to a huge and decentralized ledger that can record every transaction in the global network . Moreover, because the data is stored in a decentralized manner and synchronized in real time with time stamps , the data cannot be tampered with at will.

Recently , Goldman Sachs released a research report that blockchain will be first applied in five scenarios: sharing economy, electricity, real estate property insurance, stock trading and preventing money laundering. According to reporters , in January 2016 , the UK Chief Scientific Advisor included blockchain in the UK national strategy , and in the future it will be applied to tax supervision, anti-money laundering, national security monitoring and financial supervision technology.

However, at present , blockchain is still in the experimental stage and cannot be widely promoted. With the application of blockchain in digital currency clearing and settlement, digital asset management and other aspects , its unique effects will gradually emerge.

Industry insiders said that blockchain has or will evolve from blockchain 1.0 to 3.0 . In the first stage , digital currency is the starting point , and the related applications and supporting software and hardware are blockchain 1.0 . In the second stage , blockchain 2.0 is opened by digital assets , and various assets can be digitally registered on the blockchain to ensure asset security and data integrity. Since then , blockchain development has entered the 3.0 era , namely the third and fourth stages : the opening of broader application scenarios of blockchain depends on the evolution of the ecosystem , among which the formulation and popularization of smart contract standards is the key ; digital assets combined with the ecosystem can open up the application of blockchain value network , which can be summarized as cross-border payment, financial market transaction settlement, trade finance, Internet of Things, network security, P2P lending, insurance and similar auditing in eight major areas of professional services.