Bitcoin's credit self-provision mechanism does not mean value credit self-provision

Most of the people here today are digital currency enthusiasts and supporters, but they are also non-professionals. Although there are many issues involved in digital currency, I would like to talk about my views on two of the most basic issues.

First of all, how did digital currency, or digital assets, which have been mentioned frequently recently, rise? Why did it emerge and become an economic phenomenon in this period? Why can we determine that digital assets, or more narrowly speaking, digital currency, represent a certain future trend based on reality? When we understand a new thing, we need to have a rational and historical perspective and thinking method. This is not a trend, it is related to everyone's future life and lifestyle, and more importantly, it is related to interests. Some people say that Bitcoin is a "reaction" to the existing dollar-centered monetary system during the 2008 financial crisis, and it is a rational expression and inevitable result of people's disappointment with the existing currency; in last year's "Ownerless Currency", I believed that the emergence of Bitcoin is closer to responding to the Internet payment needs generated by the large-scale and rapid development of the Internet economy, because in this rapidly growing payment demand, the traditional bank-centered payment services are obviously lagging behind in terms of technology, cost and efficiency comparison, as well as the corresponding new business model links. It is absolutely natural for the Internet economy to exchange faster, freer and more economical payment services. In this regard, it is easy for us to find that Bitcoin is highly targeted.

On a deeper level, the process of globalization after the end of the Cold War has promoted the process of world economic integration. The cross-border transaction and payment settlement structure on a global scale has undergone great changes in terms of scale and service demand. The rapid growth of trade in goods and services has greatly promoted the increase in the number and scale of cross-border personnel exchanges and the expansion of the geographical scope. From ordinary payment settlement to capital project transaction settlement on a global scale, there has been great development in scale, breadth and depth. The existing international monetary system and the traditional international payment and settlement system with banks as the core lack innovation that keeps pace with the times. The high payment costs, mainly due to exchange rate risks, have directly become a cost barrier to further globalization and the optimization of resource market allocation on a global scale. At the same time, as evidenced by the 1997 crisis and the 2008 crisis, regional crises can quickly become global crises through the transmission of globalized trade structures and capital markets, and monetary issues have become core issues in the context of globalization. Whether from the mainstream institutions of various countries or academic concepts, the expectation of a new monetary system and settlement and payment system with higher efficiency and lower cost in the framework of liberal thought has been manifested to varying degrees. Therefore, regarding Bitcoin as a monetary phenomenon is not so much a response to the decline of the dollar's status in the 2008 crisis as a spontaneous response to the cumulative consequences of the globalization process.

Therefore, the rise of Bitcoin and decentralized digital currencies is by no means accidental. It is not a sudden whim of a certain person or organization. It at least represents avant-garde practices in the new technological context and new economic era based on our deeply rooted traditional ideas that are to some extent constrained by technology and the strength of existing systems and to some extent suppressed.

Second, what is the current practice like? What are the effects and expectations? In the six years since the birth of Bitcoin, we can see that the influence of its concept is expanding, two thousand similar currencies are blooming everywhere, the trading market system has basically taken shape, and the concept and practice of currency payment mechanism derived from Bitcoin concept and technology are very rich, and blockchain technology and practice have gradually become a hot topic. But on the other hand, the actual application of digital currency based on Bitcoin architecture still cannot form a scale. It can be said that digital currency, as a phenomenon, is still in a state of chaos. The chaotic state conforms to the laws of history, and it does not mean that the future of digital currency will be like this.

A large number of currencies that are set up with speculative or even deceptive original motives account for the majority of the so-called competitive coins. A few competitive coins that are set up for practical applications and combined with targeted business models have mostly not achieved breakthrough results, but these attempts to stick to the right path are invaluable.

So why is the progress of digital currency application not satisfactory? I think the first is the accumulation of time. At this level, this is a problem far beyond the technical level of digital currency. The essence of time accumulation is credit accumulation and cognitive accumulation. Secondly, some things may be related to our misunderstandings at the beginning, especially in China, where many people lack a deep understanding of the market economy. Decades of market economy practice with certain deformed factors are far from enough to accumulate a complete system of market economic relations in our society, people, laws and ideology. Many problems, including digital currency problems, always come down to the most basic problems of the market economy in the end, such as the recent stock market, such as real estate in the past decade, etc. Bitcoin-like problems may focus on such questions: How much is Bitcoin worth? Or is it worth money? There are many answers to the questions. A slightly more professional understanding believes that Bitcoin's blockchain architecture and its basic settings have fixed its money supply, solved the credit crisis caused by excessive banknote issuance, and made Bitcoin a monetary tool with limited supply. This actually solves the problem of self-provided credit without interference from anyone. Most of the newly generated competing coins accept and also use the same POW mechanism. Therefore, many practitioners naturally believe that the birth of a coin naturally has value and wealth effects based on this credit mechanism, and Bitcoin seems to provide practical evidence. But in fact, the POW mechanism only supports the formation of value credit, and it is not equal to value credit itself. This is true for all digital currencies with POW mechanisms.