Introduction to Bitcoin Investing

Editor's note: This article is a lecture by Mr. Wu Guanggeng (nickname: Super Bitcoin), co-founder and COO of Good Bitcoin, on Bitcoin in a well-known investment group. Mr. Wu Guanggeng has extensive experience in the investment field and many years of entrepreneurial experience. He is also a popular author on Zhihu, Baidu Baijia and other media. It is perfect for him to explain Bitcoin in a simple and easy-to-understand way.

The following is the main text.

Why did I choose to start a business in the field of Bitcoin? Bitcoin itself contains the ultimate ideal of human freedom and democracy, and at the same time contains huge commercial value. For me, whether it is out of ideal pursuit or business pursuit, it is worth persisting.

1. What is Bitcoin?

Let's start with the people's commune decades ago. In the era of the people's commune, the team leader did not give money to the team members for digging for a day, but recorded work points. For example, a strong young man would record 10 work points, and a weak girl would record 6 work points. At the end of each month, everyone would take their work points to the commune accountant to exchange for food and vegetables. The team leader kept an income and expenditure account book to record work points, which recorded: Xiao Wang dug soil for a day on a certain day of a certain month, +10 centimeters; Xiao Wang exchanged an egg on a certain day of a certain month, -10 centimeters.

In a broad sense, Bitcoin has two aspects: one is the Bitcoin network, and the other is Bitcoin. In comparison, the Bitcoin network is equivalent to the captain's account book, and Bitcoin is equivalent to the work points circulating in the account book. The production process of Bitcoin is also obtained through computer computing power mining. The computing power mining process can be regarded as a problem-solving process. Solve a problem every ten minutes, and you can get a certain amount of Bitcoin after solving it.

Of course, the number of bitcoins is constant, there are only 21 million bitcoins, which is similar to the constant amount of gold in nature, and then it is issued in half every four years. Now 3,600 bitcoins are produced every day. In the past, the production team measured the work points by the strength, and in the world of bitcoin mining, the computing power determines how many bitcoins you can mine in a day.

In the past, the ledger that recorded everyone’s work points might only be kept by the production team leader. The Bitcoin network can be equated to the production team leader’s ledger, but the Bitcoin network is a global decentralized public ledger that records every transaction in the Bitcoin network, and everyone can see it anytime and anywhere.

Here, Bitcoin can be equated to work points. Everyone can use their own work points freely, store, send, and receive. Everyone has their own unique Bitcoin address, which is a string of numbers and letters, which can be imagined as a bank card number. For example, Wang Shi wrote a real estate investment secret book. I am in the United States and want to buy it as soon as possible. Then I can send a work point (Bitcoin) to Wang Shi’s card number (Bitcoin address), and then Wang Shi will send the secret book to me. It is a small cross-border payment, real-time, and does not require a handling fee. How can I confirm that Wang Shi has received my Bitcoin? What if Wang Shi denies receiving Bitcoin? At this time, you only need to copy the Bitcoin address to the blockchain to check it out. This is as convenient as checking the express delivery number of Shunfeng, but the blockchain is maintained by the entire global network, not like a courier company building a website by itself, no one can modify it, and no one can fake it. This is the use of technology to solve the problem of trust.

The above is the answer to the question of what is Bitcoin? To sum up: the Bitcoin network is built on a global decentralized network system. It is an electronic currency system with a fixed total amount and no central bank or third-party institution involved in issuing it. Bitcoin is the currency point in this system.

2. What can Bitcoin do?

The current global monetary system is bad to some extent. The government prints money without limit, which stimulates the "rebellious" spirit in people's hearts. They hope to have a constant currency, a currency that is not controlled by the central bank or a third-party institution, and whose issuance and circulation do not require the country. The birth of Bitcoin has realized this pursuit of mankind.

In this environment, Bitcoin can be used as a safe-haven asset to buffer global black swan-like financial crises. During a financial crisis, if the currency depreciates rapidly, people will choose commodities, gold, and the US dollar, but these three have some disadvantages. For example, commodities are not easy to exchange back to their original value after the financial crisis, and it is not easy to buy gold in reality. The US dollar may be controlled, and Bitcoin does not have these disadvantages at all.

Secondly, the nature of Bitcoin is global, decentralized, and transactions are almost frictionless. Therefore, in real-world applications, it currently has unparalleled advantages in the field of cross-border micropayments. As a measure of value, it can quickly transfer value and complete transactions between any two points in the world.

3. How to get Bitcoin?

There are two ways to obtain Bitcoin. The first is to buy Bitcoin at a Bitcoin exchange. Currently, the mainstream domestic exchanges include OKCoin, Huobi, BTCC, and HaoBTC, which I participated in the startup. Purchase is very convenient, similar to stock trading. The second is to deploy mining machines to mine Bitcoin. Currently, the mainstream domestic mining machine manufacturers include Ant Miner, Avalon Miner, and BW Miner.

4. What is the current Bitcoin policy?

First, Bitcoin is legal in China. At the end of 2013, Bitcoin skyrocketed. Five ministries and commissions of the state issued a document stating that Bitcoin is not a currency, but a commodity. The people are free to participate, but at their own risk. Other countries such as the United States, Denmark, Singapore, Sweden, France, and Germany have stated that Bitcoin is legal. Recently, the United States has also defined Bitcoin as a commodity, and the European Union has recently defined Bitcoin as a currency.

5. Investment opportunities

(1) Bitcoin trading: invest in Bitcoin every month and sell it at a high price;

(2) Bitcoin quantitative trading, using the Bitcoin quantitative trading program to earn interest rate spreads 24 hours a day, 7 days a week;

(3) Bitcoin mining: deploying large-scale Bitcoin mining farms and making full use of low electricity costs to mine Bitcoin;

(4) Bitcoin startups, Bitcoin exchanges, wallets, mining pools, and media;

(5) Invest in early-stage blockchain teams, with angel venture capital holding shares.

6. Summary

Bitcoin is not a boring game for computer geeks, but a very serious social experiment. Bitcoin has been around for seven years. Judging from the development trend in the past seven years, I firmly believe that Bitcoin and the blockchain technology behind Bitcoin are the underlying applications and protocols of future Internet finance. Currently, investing in Bitcoin or blockchain technology is an investment in future trends. Of course, many domestic governments have begun to hype blockchain for political achievements and hold blockchain seminars everywhere. In fact, they don’t understand blockchain very well. The real awesome teams are still quietly developing products and applications.

Postscript: I met Mr. Wu Guanggeng twice in Changsha because I worked for Bitcoin media company Bimin China. He is a low-key and simple person who doesn't talk much. But he has another style on the Internet. His writing style is either unrestrained and vast, or simple and elegant. The freshness and vitality that comes to you make you like his writing. He loves reading but is not trapped by books. He is good at investment but pays more attention to industry. I often sigh that if such a person doesn't succeed, who will succeed?