Bitcoin: In the end, it’s just a pie

     Editor’s note : Guan Ce is an internet observer and former co-editor of TechCrunch China.

There is a jargon in the Chinese venture capital circle called "painting a big cake", which means that those who want to obtain financing or cheat in the name of financing will describe the great prospects of what they do, so that investors can believe in the potential of their projects from the bottom of their hearts, and then get real money from investors. This process is called exit. By analogy, financiers and investors continue to promote their projects to other investors in order to continue to exit.

I don’t know if Bitcoin is the biggest scam of the century, but I think it is the biggest pie of the century.

Let's assume that there is a global virtual stock market that is not regulated by any regulatory agency. Bitcoin Inc. is the first listed company in this stock market, and Satoshi Nakamoto is the founder of this company. One day, Satoshi Nakamoto developed the Bitcoin system, and as the founder, he naturally wanted to get a larger share. The total number of Bitcoins will not exceed 21 million. Let's assume that Bitcoin Inc. has a total of 21 million shares, and Satoshi Nakamoto is believed to hold about one million Bitcoins. These Bitcoins were worth more than $1 billion at the end of 2013. In other words, Satoshi Nakamoto's initial stake in Bitcoin Inc. was about 4.76%, and it will never be diluted (regardless of the increase or decrease in holdings).

Satoshi Nakamoto drew a pie consisting of 21 million bitcoins. If no one uses money to exchange it, this pie will always remain a pie. But Satoshi Nakamoto is smart. He also has a pie called "Bitcoin: A Peer-to-Peer Electronic Cash System".

As mentioned above, if there is a global virtual stock market, everyone in the world can trade on it, and there is no government supervision, then of course people can manipulate prices with confidence. What's even better is that people don't need a centralized exchange to trade directly with Bitcoin! In other words, Bitcoin also plays the role of an equivalent.

Since it is to be used as an equivalent, what should others do if they do not have such an equivalent? Either buy it or mine it. If it is a general listed company, the only way to obtain a company's shares is to buy it through an exchange. However, Bitcoin companies provide another way. Anyone who contributes to the Bitcoin trading network may mine a certain number of shares based on their contribution to the Bitcoin trading network.

In this way, Bitcoin companies expanded rapidly and attracted a group of "co-founders". These co-founders gathered together through the Internet, promoted the advantages of Bitcoin as a peer-to-peer electronic cash system, denounced the bloated and inefficient government regulation and the existing currency trading system, and sold Bitcoin to people who needed to use Bitcoin as an equivalent for transactions and speculators through the global virtual stock market, realizing the transformation from pie to cash.

At the beginning, there was only one company in the global virtual stock market, Bitcoin Company, and few people believed in Bitcoin. So, how should Bitcoin be priced as an equivalent? This is related to the relationship between supply and demand. When the supply of Bitcoin is far greater than the demand of people using Bitcoin for transactions, the price of Bitcoin is low; conversely, the price of Bitcoin is high.

Since Bitcoin is concentrated in the hands of a few people (early miners and hoarders), and the mining difficulty doubles every 4 years, coupled with the herd effect and speculation, the major shareholders of Bitcoin companies (Satoshis) can manipulate the price of Bitcoin. Since there is no government supervision, this global virtual stock market naturally has no short-selling mechanism, so Satoshis can manipulate the price openly. This is the reason why the price of Bitcoin skyrocketed in the past few years. I don’t know how many people took over.

In short, Bitcoin and other electronic currencies are equivalent to small-cap stocks. The dealers have gathered a large number of chips. From a speculative point of view, liquidity is its biggest problem. From an investment point of view, its value tends to zero. In fact, in my opinion, if Bitcoin did not have the function of an equivalent, the price of Bitcoin would have tended to zero long ago. It can be said that what currently supports the price of Bitcoin is its function as an equivalent of various criminal activities and speculators.

Satoshi Nakamoto painted a beautiful pie, but I think this pie is poisonous. It accelerates the economic circulation of criminal networks. If criminal activities are likened to tumors, Bitcoin speeds up the metabolism of tumors and makes the world worse.