Three major comparisons to see if Bitcoin is the standard

There are a lot of things going on in the cryptocurrency world. Just now, Bitpay sued the insurance company for lost coins, and then 21Inc developed a new mining computer. From time to time, some financial institutions express support or opposition to Bitcoin.
However, the price of Bitcoin still does not seem to fluctuate much. Of course, this is not the main issue that everyone should be concerned about.

I have nothing to do today, so I would like to talk to you about some comparison items related to Bitcoin. To be, or not to be: that is the question. Today I will talk about this OR, just as a starting point, hoping to trigger your thinking.

Rate hike or rate cut

Just as inflation and deflation are terms used by the government to brainwash ordinary people, the means of raising and lowering interest rates are a form of plundering wealth formed by governments in their mutual game.

Regarding interest rates, they should be completely determined by the market. If a war were to break out tomorrow, the interest rates would be ridiculously high. Everyone would want to spend money as soon as possible to enjoy themselves. Otherwise, who would be willing to lend money to others when they are still uncertain about whether they will live tomorrow? On the contrary, if life is peaceful and stable, the interest rates may become lower, because people are less likely to default in a stable situation, and favors seem to be more valuable.

But in real life, the interest rate is completely controlled by the government. In the name of adjusting economic development, China has been adjusting interest rates recently. The long-term loan interest rate has dropped from the original 6.5% to the current 5.15%, and it is entirely possible to further reduce it. On the contrary, the United States has raised the big stick of raising interest rates. It is expected that the US dollar interest rate will be adjusted within a few years. As for how much the interest rate will be raised and when it will be raised, sorry, it is confidential. This financial move by the United States has made other countries in the world nervous.

This situation is rather abnormal and does not reflect the market reality. For example, the current interest rate in China is very low on the surface, and the country's various interest rate policies are obvious, but in fact the cost of private financing is very high, and the interest rate is even around 18%. What does this reflect? It is undoubtedly that China's market environment is not as good as the leaders say, but is actually extremely bad for private enterprises.

In reality, the interest rate of Bitcoin is completely regulated by the market and lacks legal force (the legal definition of Bitcoin loans and Bitcoin IPOs is very vague, there are no effective legal provisions, and it is in a gray area). At the same time, there are great risks in Bitcoin lending (such as hackers stealing coins, platform closures, etc.), so the interest rate is higher than that of general loans.

However, the contradiction is that because Bitcoin has the characteristics of rapid rise and fall, if it plummets, the handling method can be relatively simple, but if it encounters a sharp rise, it may be completely impossible to repay normally after collecting interest at a higher interest rate, so the platform has collapsed. A more feasible way is to have a certain degree of collateral behind it. In the real world, collateral is usually a house, a car, and other valuable property, but in the Bitcoin world, absolutely no one uses their own physical property as collateral (don't question it, no one really uses physical property as collateral). Instead, it often appears that Bitcoin is mortgaged to exchange for legal currency or stocks and other securities (the mortgage ratio is ridiculously high, usually three times the amount of Bitcoin can be exchanged for one times the amount of legal currency).

However, a rather peculiar form of "以产待息" soon emerged in the Bitcoin world, whereby the platform recruited users to deposit coins, and then sold the coins deposited by users to buy mining machines to produce Bitcoin. The produced coins were then slowly accumulated, minus electricity costs, labor costs, site rental costs, etc., to become interest for users.

This model is recognized by the majority of Bitcoin players. Famous platforms include "Good Bitcoin" founded by Starry Sky and the "Jua" platform. After mastering a certain amount of computing power, Martians are also considering whether to transform in this direction.

However, Bitcoin banks also face the risk of bad debts, which is a surge in computing power. The surge in computing power has led to a decrease in Bitcoin mining output, which further causes the income to be unable to cover the legal currency expenditure for purchasing mining machines. On the whole, the growth of computing power is a game balance process. Now the computing power of Bitcoin in the entire network has reached 400P . Under this base, the possibility of a large-scale surge has been reduced a lot. Moreover, even if the computing power surges, the number of Bitcoins produced can basically meet the electricity bill expenditure and have a slight surplus. As long as it is not a continuous surge, there can be long-term income. However, as time goes on, the marginal effect of this gradually decreasing income becomes more and more obvious.

In summary, the Bitcoin bank model needs to be supported by strong computing power, because computing power can be made public, and all assets are clear, visible and intuitive.

Compared with the real world, the interest model in the Bitcoin world is more advantageous, because banks cannot provide all loan information to customers. When you deposit your currency in a real bank, the bank will lend your assets, and of course face the risk of bad debts. At the beginning, due to the lack of fiscal and financial systems in China, a large number of irregular approvals emerged one after another (the most typical example was Hainan real estate from the mid-1980s to the early 1990s, and the term "speculating on pre-sale properties" was also born here). Subsequently, banks gradually tightened their restrictions, but this also caused another bad consequence, that is, a large number of companies could not get loans.

When a large number of bad debts erupt, banks have only two options to repay their debts: one, declare bankruptcy and settle ; the other, ask the central bank for rescue and the central bank to print money for blood transfusion . In the domestic environment, the scale of bad debts has already made people feel uneasy (the largest is local debt, followed by loss-making debts of state-owned enterprises, and debts across the country are often counted in trillions). Usually banks choose the second option, and the result is that the country is kidnapped by banks and can only continuously transfuse blood for rescue, which eventually leads to inflation.

It can be seen that the existing legal currency banks are maintained by the state apparatus and the relevant monetary policies can be changed at any time.

Depreciation or constant value/increase in value

The price of a good currency should be constant over a relatively long period of time, or in other words, a good currency will appreciate over a longer time scale.

Bitcoin does not seem to be a good currency at present. Why? Because Bitcoin is very volatile at this stage. Anyone who uses it has to bear the risk of volatility. For example, if you spend 0.05 Bitcoin to buy two cups of coffee one day, but one day later, 0.05 Bitcoin can buy four cups of coffee. This is of course something consumers do not want to see (of course, if 0.05 Bitcoin is only enough to pay for one cup of coffee the next day, consumers will be very happy).

Some items in history have also served as currency. Everyone knows about shells, of course. Otherwise, why do most Chinese characters for money have a shell character next to them? But other items sound a bit weird. For example, salt was once an important currency among African tribes; dog teeth and pig teeth were once highly respected on some small island countries in the Pacific; feathers, candy, cigarettes, wheat... have also left their mark in the history of currency. As a result, it is obvious that more and more shells will be picked up on the beach, and they are even used by Western countries to fool African black brothers (you can look up those histories, and I heard that most black slave transactions were traded with shells. Alas, it's really screwed). Those weird currencies are even more unrealistic. Salt, dog teeth, pig teeth, feathers, candy, cigarettes, and wheat are deteriorating and moldy while inflating. People are in trouble and don't want to tear them down.

As the saying goes, choose the lesser of two evils. Compared with these depreciating currencies, Bitcoin is still excellent, with a constant quantity and no mold or deterioration. But compared with some strong fiat currencies (the most direct example is the US dollar, which fluctuates very slightly, and under normal circumstances, the daily fluctuations are very small), Bitcoin has great deficiencies in payment properties, a small audience, and unstable purchasing power.

But we should take a long-term view. The amount of all fiat currencies is constantly increasing, so all fiat currencies will undoubtedly show a depreciation trend in the future. However, this depreciation may not be particularly obvious in a certain period of time, so people spend the fiat currencies without knowing it. However, once the time curve is extended and the fiat currencies are examined in units of ten years, it will be found that the depreciation process is actually very drastic.

Compared with the relatively constant purchasing power of the US dollar in a short period of time, Bitcoin currently loses in terms of the number of audiences and payment liquidity. However, as time goes by, Bitcoin will continue to expand with the Internet. This expansion is a non-linear exponential expansion, and soon more people will know and use Bitcoin. When the audience of Bitcoin reaches a certain number, Yike predicts that the payment form of Bitcoin and the purchasing power it can accommodate will also enter another wonderful growth period. The relationship between Bitcoin and legal currency is naturally one of growth and decline, eroding the edges and corners of the huge legal currency institution bit by bit.

Therefore, there is a saying in the Bitcoin circle that it is very unwise to measure Bitcoin with legal currency, 1BTC=1BTC . One day, it will become the norm to use Bitcoin for daily payment purchases.

In addition, all fiat currencies have a structural crisis, which is what happens if the country behind them goes bankrupt? Don’t say it’s impossible. The 2008 financial crisis has taught the world a lesson. The most terrifying thing about black swan events is that people never know when and where they will happen.

Behind Bitcoin is the Internet, which eliminates the possibility of a considerable number of individual black swan events. If the Internet is to be completely shut down, I'm afraid that mankind will have to return to the Stone Age, right?

Gold or Bitcoin

After talking about the US dollar, let's talk about gold. If the US dollar has established its status as the world's currency in more than a hundred years, gold has played the role of the defender of human currency for more than 4,000 years. Compared with gold, what is the advantage of Bitcoin?

Gold supporters claim that gold has the function of preserving value. Looking at the long-term curve, the price of gold does show certain advantages compared with legal currency. Although there are huge fluctuations, overall the purchasing power has basically remained relatively stable.

But the inevitable problem with gold is that it is very inconvenient to carry and trade. For example, I want to pay 0.1 grams of gold, how can I do this? Gold supporters claim that gold can be numbered and digitized, and then the 0.1 grams of gold can be smoothly paid! This is really a ridiculous statement. First of all, who will keep the electronic gold? After all, it is just kept by the government. Who can guarantee whether the gold is sufficient? Publicizing gold reserves is an impossible task both now and in the future. Secondly, although the loss of gold is very small, it actually exists. For example, corrosion and wear and tear will invisibly reduce the amount of gold. Who will supervise this reduction is a very tricky matter (viewers who don’t understand this can check the policy of "fire consumption returns to the public", which is a well-known means of making money in ancient China. The famous Emperor Yongzheng once issued corresponding regulations).

Just based on the two shortcomings mentioned above, it can be concluded that in this Internet age, gold will never be able to return to the platform of daily payment.

Bitcoin perfectly solves the above two problems. First of all, Bitcoin transactions are convenient. It is an electronic product itself, which does not require physical objects and can be traded anywhere there is Internet. Secondly, there is basically no loss in the Bitcoin transaction process (if you say that the transfer fee is a loss, then it is basically fixed, and the number is very clear and transparent, and is monitored by the entire Internet).

Going further down, in the economics field, people usually believe that the output of gold is constant, so the quantity can be predicted, and there is a certain corresponding supply and demand relationship, so using gold as payment will not cause inflation. However, the foreigner does not think so. As a mineral resource, of course, the discovery of one or two more gold mines on the earth will not have an impact on gold production. But the scary thing is that human knowledge is constantly improving, and the extraction of gold will only become easier and easier.

Do you know what Napoleon's crown is made of? It's not gold, but aluminum... Because there was no effective way to extract aluminum at that time (because the properties of aluminum are so damn active, the ancients couldn't smelt aluminum with their methods), and when electricity emerged as a new tool of human civilization, it became very easy to decompose aluminum compounds, and aluminum became ubiquitous.

The gold that people are currently mining is limited to the surface of the earth. The deeper you dig, the harder it is to dig. However, the gold on the surface is really a drop in the bucket on the earth. The place with the most gold on the earth's surface is the ocean, estimated to be around 10 billion tons. Unfortunately, no one has found an effective way to extract gold from the ocean.

If scientists and technicians are able to extract this gold one day, even just a small portion of it... I'm afraid Goldman Sachs will have to continue to adjust its expectations for gold prices.

Let me imagine it with a sci-fi mindset. Compared with the gold reserves in space, the ocean is nothing compared to the gold reserves in space. In 1999, data sent back by the NEAR spacecraft showed that the amount of gold on the asteroid Eros alone exceeded the total amount of gold mined on Earth in history. If humans really fly into space...

Compared with Bitcoin, gold has become a dream of the ancients. The cornerstone of Bitcoin determines its success. It is built on the laws of mathematics, which is also the cornerstone of the universe. No matter where in the universe, it will be regarded as a criterion.

It is a bold inference that Bitcoin can not only be used for payments on Earth, but it is also equally useful as a cosmic currency!