Bitcoin’s cooperative and destructive nature

Chapter 0 Introduction

There are two books like this: The Selfish Gene describes how to prosper by eliminating your competitors. Darwin's Blind Spot expresses how to thrive through cooperation. Think about it, competition is indeed these two models.

Just like there are often two types of business models that make a great business: one is a business that prospers by eliminating competitors; the other is a business that thrives through cooperation.

The typical representative of the former is Apple, whose products are exclusive and dedicated to creating user stickiness, so that once users have used Apple, they are too lazy to try its competitive products.
There are too many representatives of the latter, the most recent being Uber. The Uber model is to identify an asset with fixed costs and excess and then redistribute it to create more value for more people. Uber is designed to make more and more people profit, so you can't help but get involved.

Eliminating competition and co-operative prosperity are both good business models, each with a large number of successful cases. This article attempts to look at Bitcoin from these two perspectives.

Chapter 1 The Collaborative Rise of Bitcoin

Bitcoin is open source, all details are public and transparent, anyone can modify it freely, anyone can freely connect to this system. If you can program, you can even create your own currency.

Many people may not believe that a group of free and undisciplined people can bring high-quality products. They all think that truly good things require serious occasions, such as high-end office buildings, and neat and uniform teams wearing suits and ties. Most people also believe that closed, strictly controlled and precise management is a necessary condition for obtaining excellent products. If you tell them that there are programmers in the world who don’t know each other, who may stay at home, eat instant noodles, and don’t wear pants, and then they write a set of codes together, piece together a system, and then change the world. They will think it’s a joke.

But in fact, many of the mobile phones we use every day are equipped with Android, which is developed from Linux. Linux was created by a Finnish sophomore named Linus in his school dormitory in 1991. Linux is used everywhere, including banking systems. More complex machines, such as cars and CNC machines, have built-in operating systems based on Linux. The development of Linux was perfected by a group of messy people who are called a scumbag by most people.

A serious environment and complex processes are more likely to resist sabotage by bad guys. Everyone who wants to participate needs to be strictly reviewed, and the company's management and processes can identify saboteurs. But this is not a necessary requirement for producing good products, it is a necessary requirement for business operations. The boss needs a serious environment and complex processes to ensure that the wages he pays are not taken away by white-collar workers, to ensure that employees must cooperate and not make conflicts casually, and to use this set of processes to ensure that his business secrets will not be obtained by opponents, etc. However, the company's organizational structure or other serious organizational structures, such as the national army, are not necessary conditions for producing good works.

From the perspective of corporate operations, Bitcoin is also a company, which we call a distributed autonomous system. This organizational model is completely different from that of a company or a country. This difference is not because the people involved in Bitcoin are the most honest people in the world, or that we are all selfless and will not destroy the Bitcoin system. In fact, there are many scammers in the Bitcoin system. Every day, someone spreads rumors, and someone often steals and deceives others. The Bitcoin system itself is also often attacked. However, the way to ensure the security of Bitcoin is not like a company organization, which has a set of processes and uses HR to identify the loyalty of employees. The Bitcoin system has no concept of access rights. Bitcoin relies on a simple reward system, which is mining. You can only participate in it according to the Bitcoin protocol, consume your own resources to mine, and win the competition among many miners. You can get a certain amount of Bitcoin as a reward. This simple rule makes it more advantageous to follow the rules of the game than to break the rules. Only when more than 51% of the participants follow the rules, the Bitcoin system is safe.

If you participate and follow the rules, you can make a profit. This simple setting, which allows more people to profit, is the basis for the cooperative prosperity of Bitcoin.

Just like Uber, as long as you use your mobile phone to connect your car to the Uber network and abide by the rules, you can provide services to others and collect profits. This setting that allows more people to profit will definitely win.

Bitcoin is a completely open system. Anyone can connect to the network without getting anyone's permission in advance. You can do whatever you want because the Bitcoin system is not afraid of you and does not need to restrict bad guys from accessing it. In this way, everyone's creativity can be freely exerted in the Bitcoin system and displayed to all participants. As long as your work is good enough, you will be able to get a lot of support and you can also make a profit.

Any company can also connect to this network, and can use its own organizational power to participate in the rules of the game and make profits.

There are so many things you can do with Bitcoin, from simple things like accepting and paying Bitcoin, with just a little knowledge, you can expand your payment range or the corners where you accept payments to the world. Complex things like writing a smart contract agreement to start zero-trust cooperation with strangers.

This is truly a system that can benefit countless people.

Chapter 2 Bitcoin’s Destructive Competition

In modern civilized society, science and technology are advancing by leaps and bounds, so there has emerged a phenomenon that I call competitive destruction.

In the 19th century, cities like London and Paris were full of horse-drawn carriages, but the city was also annoyed by horse manure. The mayor thought about how to clean the streets of horse manure every day. But he never came up with a solution. Finally, the invention of the car solved the problem naturally. This is how the car destroyed the horse-drawn carriage. At that time, if you were in the horse-drawn carriage business, you had to close down - you were destroyed.

Nowadays, any city, even a slightly larger one, is facing traffic jams. Governments have tried every possible way, such as the congestion tax in the West and the license plate restrictions in China. But these policies can't solve the traffic jams. Perhaps the solution is to use driverless cars to replace the current cars.

In the history of business, destructive competition has emerged one after another, such as smartphones destroying feature phones, and it will soon happen like Uber destroying government-regulated taxis.

The fear of destructive competition may be deeply rooted in our genes, just as described in The Selfish Gene. In history, there have been incidents where workers smashed machines because they were afraid that the machines would have a destructive advantage over them. But it has always existed.

From a technological perspective, Bitcoin looks all too likely to be destructive.

Bitcoin is a decentralized ledger. Its advantage is that it is extremely low-cost and the cost of bookkeeping is almost negligible. The second advantage is that the ledger cannot be forged, or the cost of forging is extremely high. Given the current Bitcoin network computing power, the cost of breaking it should start from tens of billions of dollars. The third advantage is that it is universal and barrier-free. As long as you have an Internet connection and a simple smartphone, you can check and keep accounts anywhere in the world.

Essentially, what banks do is keep accounts for their users, and cross-border remittances, such as Western Union, use rather primitive technology, with high fees, slow processing, and complicated procedures.

Forbes once published an article claiming that the total amount of international remittances reached 583 billion US dollars in 2014. The average remittance cost is as high as 8.85%, which is more than 50 billion US dollars.

In fact, these traditional international remittance companies are waiting to be destroyed by Bitcoin.

There are already a lot of cross-border payment businesses using Bitcoin. The data available on the Internet is too chaotic to be accurate. Some say it is 1 billion US dollars, and some say it is 50 billion US dollars.

In addition to its great potential in international remittances, I think Bitcoin will also destroy the credit currencies issued by some unscrupulous governments. Bitcoin's cross-border, anonymous, inflation-resistant, and unfreezable features, coupled with its remittance function, make Bitcoin an excellent tool to fight against untrustworthy fiat currencies.

Wherever the Bitcoin network reaches, you can easily exchange various currencies. If a currency loses people's confidence and abandons its means, with the tool of Bitcoin, its fate of being destroyed is inevitable.

What potential does Bitcoin have? Let's wait and see.

Chapter 3 Change takes time

There is no sudden change in the process of changing the world. (Don’t expect Bitcoin to have a sudden effect on your life either.)

At present, there are more and more applications using Bitcoin and more and more merchants and consumers who can accept Bitcoin, but it is obvious that there is still a long way to go before the critical point of explosive growth. Whether merchants are motivated to accept Bitcoin depends on whether there are enough consumers using it. And whether consumers are motivated to use Bitcoin depends on whether there are enough merchants accepting Bitcoin. This is a classic case of network effect. To break the deadlock, the Bitcoin network needs to continue to develop. Just like the value of fax machines can only be reflected when the number of people who own Bitcoin reaches a certain number. Only when the number of people who own Bitcoin and those who are willing to accept Bitcoin reaches a sufficient number and is distributed in enough regions, the destructiveness of Bitcoin can be slowly reflected.