How Gold Holders Evaluate Bitcoin

The price of Bitcoin once exceeded the price of gold. One Bitcoin once rose to $ 1,242.00 , while the price of gold was $1,241.98 per ounce. "The price of Bitcoin is completely determined by the supply and demand of the market. If more people need it, the price will rise, and if fewer people need it, the price will fall.

01Can Bitcoin be compared to gold? On the nature of currency

Just as "Chinese aunties" took advantage of the plunge in gold prices to buy frantically and were trapped, another even crazier investment product also experienced a sharp drop in the global market. Since the beginning of this year, the online virtual currency "Bitcoin" created by computer geeks has been hyped up around the world, with its price soaring from more than a dozen dollars to a peak of more than two hundred dollars before plummeting.

Before this, this invisible and intangible virtual currency has attracted a large number of economists to study, and even more attracted a large number of "gold diggers" and "investors" to mix in it. They either upgraded their computer equipment to "mine" or waited for opportunities to see the instability of the sudden rise and fall. In short, they believe that this "Bitcoin", which will only have a circulation limit of 21 million by 2140, has unparalleled scarcity.

Can Bitcoin’s characteristics gain human trust?

If you agree with the above, then we should discuss Bitcoin next.

The first is anti-counterfeiting. Bitcoin uses distributed clients to save the same transaction history ledger to ensure that there is almost no possibility of counterfeiting and double payment. At the same time, the total amount of Bitcoin that has been created is also public and transparent. You can use various means to check whether your transaction is real and valid on a trusted third-party platform.

Can Bitcoin Compare to Gold? Who Will Have the Last Laugh?

Without the need for professional measuring tools and identification experience, Bitcoin is definitely better than gold in terms of anti-counterfeiting, at least on the Internet. Because Bitcoin itself cannot exist without the Internet, the following comparisons are all based on the existence of the Internet.

Second, divisibility. As a mathematical currency, any Bitcoin can be divided infinitely. No professional tools are required, and there is no loss. Therefore, Bitcoin is far more divisible than gold.

Third, it is easy to carry. Many people think that Bitcoin wallets can only exist in computers or other mobile storage devices. In fact, Bitcoin wallets are just a string of characters and numbers. As long as you are not afraid of forgetting, you can remember this string of passwords in your mind. As long as you can make sure that it is not repeated with others, you can even customize a unique and easy-to-remember password as a Bitcoin wallet, commonly known as a "brain wallet." Even if you don't use a brain wallet, using a USB flash drive, the portability of Bitcoin is far greater than that of gold.

Why Gold Gains Human Trust

Elementary school textbooks say: "Gold and silver are not naturally money, money is naturally gold and silver." Rather than asking why humans trust gold and silver so much as money, it is better to ask how gold and silver as money gain human trust.

First, it is difficult to counterfeit. Currency that is easy to counterfeit is difficult to gain the trust of others. The density and glittering physical properties of gold are unique in nature and are easy to distinguish.

Secondly, it is easy to divide. Goods are of different prices, and you cannot expect the same price every time you trade. Gold has a strong ductility, and it does not cost much gold to make gold foil for the entire Buddha statue.

The above characteristics determine that gold is naturally suitable for the role of currency. Therefore, it is not accidental that humans have chosen gold as the main currency in the past thousands of years of history, but because among all the natural currencies available, gold is the most suitable choice!

02Gold and Bitcoin are not legal currencies. Prices have plummeted and soared

Neither gold nor Bitcoin is legal currency

One of the issues that people are generally concerned about is the legal issue. Let me ask you a question first: "Is gold a legal currency in our country?"

If you just go by your feelings, many people will answer: yes. Sorry, the answer is wrong. The only legal currency in China is the RMB . In fact, at the beginning of the founding of the People's Republic of China, it was forbidden for private people to collect and trade gold. This ban was not gradually lifted until around 2000. The first gold exchange was established in Shanghai in 2002. Although there is no law now (the "Regulations on the Administration of Gold and Silver of the People's Republic of China" has been abolished) prohibiting people from investing in and owning gold, if you think that no prohibition means legality, then investing in and owning Bitcoin is also legal now.

If my country's currency law still stipulates that the only legal currency is RMB, then it can be foreseen that, like gold, even if the country starts to reserve Bitcoin in the future like it reserves gold, Bitcoin will never become my country's legal currency. In terms of legal status, gold and Bitcoin are the same.

Bitcoin and gold prices plummet and surge

Bitcoin is only used in the online world, which is fine. However, as more and more people gradually know about Bitcoin, it has moved from virtual transactions to real transactions. In the past two years, everything from computers to red wine and even cars can be paid with Bitcoin. As a result, Bitcoin started to go crazy, and the price soared. At the beginning of this year, Bitcoin was only $20, but it had risen to $200 in April. There is a surge and there is a plunge. On April 11, Bitcoin rose to a high of $266 and then began to plummet, falling to a low of $105. On April 12, it hit a new low of $58.

Can Bitcoin Compare to Gold? Who Will Have the Last Laugh?

Gold and Bitcoin plummeted at about the same time, indicating that speculation in the market is always inevitable and always comes at a price. Speaking of the decline in gold prices, Soros said that gold's status as a so-called "safe haven" has been destroyed, and it has been proven that gold is also an unsafe investment.

There is no commodity that only goes up and never goes down. Gold itself does not have a bubble, but if the price is too high, there will be a bubble, and the bubble will eventually burst. The same is true for other assets such as Bitcoin. Therefore, there is no so-called safe investment in this world, and all investments are risky.

03 Bitcoin makes people happy and worried

Capital tycoons "take charge"

Cameron Winklevoss and Tyler Winklevoss, brothers who graduated from Harvard University, joined the industry of investing in Bitcoin. The most famous thing about the brothers was that they sued Zuckerberg, the founder of the famous social networking site Facebook, saying that the alumnus' Facebook site was an idea "stolen" from them. In the end, they received cash compensation worth $65 million and a portion of Facebook's shares in 2011.

The Winklevoss brothers currently own about 1% of the global Bitcoin market.

Hacker is the sensitive word of "Bitcoin"

On June 19, 2011, the Bitcoin transaction price on the trading website Mt.Gox was originally close to $18, but was artificially changed to 1 cent, and the registered user information was also leaked. Among them, a user who called himself Allinvain lost 25,000 Bitcoins, which was equivalent to more than $500,000 at the time. In 2012, due to the leakage of the administrative password of the website hosting provider's server, 46,703 Bitcoins worth $228,845 were stolen.

In April this year, after the reopening of Bitcoin trading, there was a widespread trading delay. Although they later claimed that the server was dragged down by users' high trading enthusiasm, it was soon almost "paralyzed" again. Hackers combined multiple computers as an attack platform and used reasonable service requests to occupy too many server resources, making it impossible for other legitimate users to get a response.

Every hacker attack has dealt a huge blow to the price of Bitcoin: originally, the design concept of Bitcoin was to be "safer than the central bank ", but hacker attacks may make it even less safe.

04 Bitcoin in detail

What is Bitcoin? Numbers!

"Bitcoin" is the basic unit of a virtual currency system. It is not a tangible object. It is just a set of numbers associated with a Bitcoin address, abbreviated as "BTC" (BitCoin) in English.

How to get Bitcoin? "Mining"!

To obtain Bitcoin, a miner must download the client program from the official Bitcoin website. After installation, a Bitcoin address will be obtained directly. Next, the miner needs to download a special Bitcoin calculation tool. The program will continuously calculate a series of "math problems". When the miner successfully completes a "math problem", he or she may get a certain amount of Bitcoin.

How many bitcoins are there? 21 million!

Since Bitcoin is not issued by a country's central bank, but created by the entire network, it will not depreciate due to over-issuance like paper currency. In the network, the difficulty of calculation is automatically adjusted. For example, 10.5 million "Bitcoins" will be produced in the first four years, and this number will be halved every four years. According to this calculation, the final number of Bitcoins will eventually approach 21 million in 2140.

Bitcoin is called "digital gold"

Some people say that since the total amount of "Bitcoin" is fixed, there will not be a large amount that triggers inflation.

Can Bitcoin Compare to Gold? Who Will Have the Last Laugh?

In a blog post, Nakamoto detailed the shortcomings of current currencies: “Central banks need to make people trust that they will not debase their currencies, but they have broken that trust many times in history; banks need to make people trust that they will keep depositors’ money, but in fact they often lend money to others, causing bad debts.”

The idea is to create a currency that central banks cannot devalue and governments cannot tax, in other words, they want to create digital gold.

That’s why demand for Bitcoin is particularly strong in times of financial crises. For example, after the Cyprus crisis broke out in March this year, the value of Bitcoin rose by 15% in two days.