What are the advantages of Bitcoin payment?

Becoming a better payment system is the fundamental driving force behind the emergence of the Bitcoin system and the soaring price. However, after the investment and speculation boom from the end of 2013 to the beginning of 2014, the price of Bitcoin has been falling all the way, constantly breaking the psychological bottom line of believers. Many people in the industry have also begun to doubt whether Bitcoin is really a better payment system? With the rise of Alipay, Apple Pay, WeChat Pay, and P2P finance, some people assert that legal currency payment still has great prospects and Bitcoin payment has no advantages. If Bitcoin payment does not have advantages, it will not be necessary to exist. If you have hope for Bitcoin, you must answer: What are the advantages of Bitcoin payment?

1. The nature of precious metal currencies, legal tender and Bitcoin

Payment is the basic function of money. The superiority of a payment system fundamentally depends on its nature as money. From the original shell currency to the current legal tender system, money has developed into a complex system. It is not just the banknotes in your hand, but a series of economic activities that even the central bank cannot control. To compare the payment advantages of different currencies, we first need to compare the essential differences between various currencies.

The so-called essence is the fundamental reason why a currency becomes a currency, that is, why others are willing to exchange valuable things for the so-called currency in your hand. Shells, wheat, gold, and silver become currencies because they have some use and are scarce before they become currencies, that is, they have value. This value is widely recognized, so the acceptors are convinced that it can be exchanged for other things they need. In the exchange, people found that the natural properties of gold and silver are more convenient to store, transport, divide, and measure than other commodities, and gradually formed a consensus on using gold and silver as currency. In other words, the essence of precious metal currency lies in its existing value supported by its natural properties and widely recognized by society.

The value represented by the coin exceeds the value of the precious metal content because it contains people's trust in the coiner or issuer. As a currency, paper money, when it still represents precious metals and can be exchanged for precious metals at any time, its value comes from precious metals, but when it is decoupled from precious metals, it completely loses the social value supported by its natural attributes, and its basis is entirely the trust in the issuer. Why do people trust the issuer? Initially, it was due to the long-term accumulated reputation and visible asset protection of the issuer, which is private paper money. As the state became the only issuer, state power became the basis of paper money, because some people trust the government and the rest fear the government. Such paper money is called legal tender, and its essence is state power. Even if its form expands from paper money to bookkeeping currency and electronic currency, its essence has not changed.

Bitcoin is essentially a man-made public currency. In fact, since the beginning of coinage, currency has had traces of being man-made. Today's legal tender only has a little bit of the natural properties of paper. Bitcoin, on the other hand, has no physical form at all. Its existence is based entirely on four technologies and systems designed by humans: first, asymmetric encryption technology, which realizes simple and secure currency control; second, a distributed consensus verification mechanism, which makes the system independent of any centralized power organization; third, blockchain technology, which creates an unchangeable transaction record; and fourth, a proof-of-work mechanism, which ensures honest accounting. Based on the above technologies, Bitcoin has become a man-made public currency system that everyone can participate in and no one can judge.

2. Bitcoin transcends the natural limitations of gold and the power drawbacks of fiat currency

In essence, Bitcoin and legal tender are both man-made currencies. Their advantage over gold is that they are free from the limitations of natural properties, such as storage, transportation, segmentation, weighing, inspection, wear and tear, etc., which can greatly reduce the trouble or cost of use and improve economic efficiency. However, legal tender relies on state power to replace gold, and while improving economic efficiency, it also pays a price.

1. Those in power may use their monetary power to seek personal gain

The owners and executors of any government power are specific people, and they all have their own interests. Currency has a wide range of influences, and there are many ways to seek personal gain, the most direct of which is to increase the issuance of currency. Therefore, currency is something that those in power must monopolize. It is for this reason that in the early authoritarian system, financial attempts to break away from the gold standard ended in failure because power was not restrained. Only in a democratic system that effectively restricts royal power and implements checks and balances did currency truly bid farewell to the gold standard and successfully evolve into a modern legal currency system. Even in a democratic system, it only curbs the unscrupulous self-seeking behavior of those in power, while more secretive ways of self-seeking still exist, such as abusing monetary power for elections, political achievements, and the interests of people with connections. Therefore, looking back at history, the history of currency after the end of the gold standard is a protracted history of inflation.

2. Wrong monetary decisions by the government can harm the economy

Under the gold standard, the supply and demand of money is mainly determined by the market and is the product of individuals' smart decisions based on their own economic activities. Even if individual decisions are wrong, they will not have a big impact. Under the fiat currency system, money is separated from the physical basis. The government controls the money supply and can effectively influence demand and circulation. Once the government's centralized decision-making is wrong, it will cause systemic damage to the entire economy. The government is only a decision made by a few people. Whether in terms of internal motivation, ability level, or the degree of mastery of market information, it is not as effective as the decentralized market decision-making. Therefore, mistakes are inevitable, but the size, frequency and correction efficiency are different. The more centralized the government, the higher the frequency of mistakes, the greater the harm, and the more difficult it is to correct.

Since the current fiat currency system puts the control of the monetary system, which is crucial in the market economy, in the hands of the government, it seems not an exaggeration to regard the central bank as the last remaining bastion of authoritarianism in the market economy. It is precisely because of these drawbacks that the famous liberal economist Friedman said: "Money is so important that it cannot be handed over to the central bank."

One of the purposes of the Bitcoin system is to get rid of the control of state power. Through distributed verification mechanism, blockchain technology, asymmetric encryption technology and proof of work mechanism, a public currency system that does not rely on any authority has been successfully established. While eliminating the above power drawbacks, it retains the main advantages of legal currency over gold.

3. Bitcoin eliminates the huge institutional implementation costs and exchange costs of legal currency

The legal tender system not only has the drawback of state power control, but also has considerable operating costs, mainly system implementation costs and international exchange costs. Bitcoin almost completely eliminates these costs.

1. The implementation and supervision of the fiat currency system requires huge institutional costs

Legal tender relies on a kind of social relationship - a series of systems, procedures and norms enforced by state power, such as who can issue new currency, who can keep accounts, how to collect and pay, how to reconcile accounts, how to aggregate data, etc. In each link, there are many selfish individuals involved, and sufficient supervision, checks and balances, review and other mechanisms must be set up to prevent individuals from seeking personal gain and making mistakes. Because of this, the banking system that implements the legal tender function has the most stringent and complete operating standards and security facilities in all industries, as well as a large number of selected labor forces. This costs a huge amount of money. Bitcoin's technological innovation has freed the main links of the bookkeeping currency system from dependence on interpersonal relationships, saving huge institutional costs.

2. Huge exchange costs between legal tenders issued by different countries

The power of a country only has the highest authority within its own country, so different countries have their own legal currencies, such as the RMB and the US dollar. Beyond the scope of the country, the authorities of a country cannot control the currency as arbitrarily as they do at home. If they want to expand the international influence of their own currency, they can only honestly compete with strength, build relationships, and earn credibility. In addition, the right to issue and manage currency itself has huge benefits, and each country basically has its own legal currency. In this way, cross-border economic activities will cause currency exchange problems, increasing at least three costs:

1. Remittance and exchange costs. That is, when transferring funds from China to the United States, RMB must first be converted into US dollars and then remitted. Both steps require multiple specialized institutions to provide services, consume resources, and charge fees, which incurs costs for both society and individuals.

2. Exchange rate fluctuations harm the economy. The exchange rates of currencies of various countries are affected by many factors and will fluctuate constantly, which creates operating risks for entities engaged in international economic activities. For example, a business that is expected to be profitable may fail unexpectedly due to exchange rate fluctuations. Exchange rate fluctuations stimulate foreign exchange speculation. Although it helps to reduce fluctuations, increase the depth of foreign exchange transactions, and improve liquidity, the entire foreign exchange trading system itself consumes a lot of social resources. In order to make profits, it even violates the industry's values, creates exchange rate fluctuations, and exploits the real economy.

3. Currency conflicts between countries damage the world economy. Since a government can freely issue its own legal currency and circulate it internationally to a certain extent, in order to gain a competitive advantage between countries, some monetary policies can be adopted to improve their own interests at the expense of other countries, and even rise to currency wars. This is not a zero-sum game, but a negative-sum game. It may be beneficial to the country in the short term, but it will also lead to retaliation, resulting in a lose-lose situation. In addition, these policies increase the risk of exchange rate fluctuations, disrupt market order, and generally damage the world economy.

Bitcoin transcends state power, has no physical medium, and does not even need to be carried. As long as you know your private key, Bitcoin will follow you around the world and you can freely pay in stores that accept Bitcoin. There is no remittance cost, no exchange cost, no exchange rate fluctuation, no exploitation by financial predators, and it is no longer a weapon that can be used arbitrarily by a country in national conflicts.

4. Bitcoin can achieve credit expansion at a lower cost

In the bookkeeping currency system, the money supply in the market can be multiplied through the lending and borrowing of money. For example, if A deposits 1 million banknotes in a bank, his account will increase by 1 million for bookkeeping and payment, and the bank will lend 800,000 of the banknotes to B, so B will have 800,000 for payment, and the total payment capacity in the market will become 1.8 million. If B continues to deposit in the bank and generate new loans, the money supply will continue to increase. Therefore, in the modern monetary system, most of the money supply in the market comes from the credit expansion of commercial banks.

The total amount of Bitcoin recorded on the blockchain is fixed and cannot be increased artificially, but this cannot be excluded from the blockchain. People borrow and lend Bitcoin based on credit. For example, if A sets up an account on a platform and deposits 1 BTC, he can pay this 1 BTC to B who also opened an account on the platform. The platform only needs to record it, and there is no need to use this 1 BTC on the blockchain. At this time, if the platform lends this 1 BTC to C, the actual BTC used for payment in the market will increase. This expansion process is similar to legal currency, and it also adds interpersonal trust, increases market liquidity, and enables Bitcoin supply to show a certain degree of flexibility according to changes in currency demand, which is generally beneficial to the economy.

Credit expansion can be seen as an extension of the Bitcoin system. This extension adds interpersonal trust to the Bitcoin ecosystem, which makes the system operation begin to have institutional costs similar to the legal currency system. However, due to the technical advantages of the Bitcoin system, the institutional costs generated under the same scale and depth of credit expansion will be much lower than the legal currency system.

1. Bitcoin’s base currency operates stably and transparently

The Bitcoin balance recorded on the blockchain can be regarded as the base currency in Bitcoin credit expansion. According to the rules of distributed verification, the scale and issuance speed of this base currency are fixed, and even where each coin comes from, where it goes, and at which address it ultimately exists are open and transparent. Credit expansion based on this has greater certainty and transparency than credit expansion of legal tender. The legal tender system has great uncertainty and opacity at the base currency level, which is controlled by the subjective intentions of the monetary authorities. Moreover, the monetary authorities often intentionally create uncertainty and opacity to get rid of the rational expectations of micro-subjects and make monetary policy effective. The unstable and opaque foundation will naturally make the credit expansion built on it more uncertain and opaque.

2. The credit status of Bitcoin financial platforms is easier to verify

During the credit expansion, the verification of the credit status of the credit platform is an important part of ensuring the security of the financial system. The fiat currency system has established a central bank system, high entry barriers and a series of strict systems to ensure that the credit status of the financial system is at a safe level, which is costly. The Bitcoin system can achieve complete openness and transparency of information without leaking private keys and user personal information, which makes it easier for Bitcoin financial platforms to prove their credit status without relying on third parties. The simplest way is to make a transaction with the Bitcoin reserve, and then prove through a signature that the platform controls the private key of the payment address. The openness of Bitcoin technology also provides more possibilities for technical innovation in credit verification, such as 100% reserve verification technology. These are things that the fiat currency system cannot do.

3. The Bitcoin system will not be held hostage by credit expansion

In the fiat currency system, due to information asymmetry and the deep-rooted uncertainty and opacity of the system, financial institutions tend to expand the scale of credit expansion for their own benefit to increase their profits, which will increase financial risks. The central bank is often unable to curb the expansion of risks in time due to insufficient information, limited anticipation ability and the fact that those in power are happy to see economic prosperity. When the risk is exposed, a large number of business activities on the verge of failure have accumulated in the economy. Once bad debts lead to the bankruptcy of financial institutions, it will trigger a crisis of trust, and the entire financial system will have a chain reaction, pushing the economy into a great depression. At this time, the central bank has to use its monetary power to issue a large amount of currency to hedge against the credit tightening. This money first enters the financial system and then enters the market. In the inflation caused by the increase in currency issuance, the redistribution effect subsidizes the financial system again. In this way, the financial system kidnaps the entire economy with its own mistakes and obtains greater benefits, but it damages the entire economy. In the Bitcoin system, individual financial institutions will prove their credit through technical means, and no central bank can issue more Bitcoin. Therefore, this kind of financial kidnapping will no longer exist.

In short, the credit expansion technology and system of the legal currency system can be borrowed and adopted by the Bitcoin system at a lower cost. Conversely, many technologies that Bitcoin can adopt are not feasible in the legal currency system, which is a huge advantage of Bitcoin.

5. Bitcoin payment has inherent technical advantages and room for expansion

The advantages of Bitcoin over legal tender are more directly reflected in the payment technology level. Similar to the credit expansion level, Bitcoin can adopt all payment technologies of the legal tender system, while many Bitcoin payment technologies cannot be realized by legal tender.

1. Bitcoin can use various existing payment technologies of legal currency

The main payment methods of the legal currency system include paper money, bank accounts, debit cards, credit cards, etc. In recent years, with the rapid development of the Internet economy, electronic banking, Alipay, WeChat Pay, Applepay, etc. have emerged. All these payment technologies can be transplanted to the Bitcoin system. Paper money and bank cards that are mortgaged with Bitcoin can be issued; from a technical point of view, it is not difficult to replace legal currency with Bitcoin in payment methods such as electronic banking, Alipay, WeChat Pay, Applepay, etc. In fact, PayPal has already incorporated Bitcoin into its payment system.

2. Bitcoin is a natural internet currency

Bitcoin has been freed from the constraints of traditional natural media and social relations since its inception, and is naturally suitable for electronicization. The decentralized participation model achieved by distributed verification is perfectly integrated with Internet technology and Internet spirit. At present, the developed Internet has enabled the world to transcend geographical boundaries and become a closely connected large community, while legal currency has set up economic barriers for this community that should have been free: you can communicate with people on the other side of the ocean, but you cannot pay freely. The emergence of Bitcoin has broken these boundaries and given the Internet economy its own blood circulation system.

3. The openness of Bitcoin technology stimulates payment innovation

The Bitcoin system is completely open. Its technology is open, its code is open, and its accounting content is open. Anyone who wants can not only learn every detail of the Bitcoin system, but also try to improve it. As long as it is an improvement recognized by everyone, it will be adopted by the system, regardless of who the author is. In fact, the Bitcoin system is built in this way. With such openness, Bitcoin payment is easier to stimulate and accept innovation than any other currency. In recent years, there have been many innovations in Bitcoin payment at home and abroad, all of which have been completed by small and medium-sized enterprises or even individuals. This is unimaginable under the traditional financial system.

4. Bitcoin technology can be expanded from currency to more fields

Bitcoin's asymmetric encryption and blockchain technology, as well as the increasingly accumulated and expanded blockchain, can not only be used for currency functions, but can also be extended to many social and economic activities related to authority identification and information notarization. For example, it can be used for the signing and notarization of contracts, securities issuance, the establishment of wills, and the authority authentication of electronic devices. These extensions will receive more attention as the currency functions of Bitcoin are widely realized, and will gradually be applied to reality, which will also promote the wider realization of Bitcoin currency functions in the process.

6. Major obstacles facing Bitcoin payments

Bitcoin has significant advantages, so many supporters firmly believe that it can rise quickly and even replace legal tender. However, the sluggish price of the currency, the demise of companies and the departure of supporters since 2014 have severely frustrated this optimistic estimate. This is because while seeing the advantages, the obstacles to the development of Bitcoin are underestimated. In the early stages of development, Bitcoin did face many obstacles.

1. The scale effect of legal currency curbs the development of Bitcoin

The use of currency has obvious scale effect. If a certain currency is used by many people, it will be more convenient to hold this currency for payment, so more people will use this currency. Although Bitcoin has many advantages, the biggest complaint of Bitcoin holders is that they cannot buy what they want, because most people are only willing to accept legal tender. This is the biggest obstacle facing the development of Bitcoin at present.

2. The Bitcoin market lacks depth and is highly volatile

At present, Bitcoin is not capable of becoming the main means of payment in a certain area, and the use of Bitcoin is inseparable from the exchange with legal currency. Therefore, the Bitcoin trading platform that completes the exchange with legal currency is a crucial link in the current Bitcoin economy. Although the scale of Bitcoin-to-legal currency transactions has increased significantly since 2013, the transaction depth is still thin. Large-scale transactions will cause large price fluctuations, which makes enterprise-level Bitcoin economic activities face high exchange costs, that is, they will pay a high price when they need to buy Bitcoin, and can only accept a low price when they need to sell. Insufficient depth also leads to large fluctuations in the legal currency price of Bitcoin, increasing the operating risks of related activities.

3. The development of Bitcoin is restricted by the current system and laws

As a new but very important economic thing, Bitcoin lacks compatibility with existing systems and laws. On the one hand, the development of Bitcoin will have a significant impact on the current economic, social, and even political power structure, especially challenging the country's monetary power, and will be resisted or even suppressed by the current system and legal framework; on the other hand, countries lack sufficient understanding and expectations of such a far-reaching new thing, and are very cautious in the construction of systems and laws. This leads to the lack of necessary institutional norms and legal protection for Bitcoin-related economic activities, increasing the risk of participation by enterprises and individuals.

4. Monetary regulation and deflation concerns in the Bitcoin economy

From the perspective of the overall impact of the monetary system on the economy, economists and monetary authorities are most worried about losing the ability to regulate the macroeconomy through monetary means, especially when the economy is facing recession and deflation. Under the gold standard monetary system, the expectation of economic depression will cause a rapid contraction of credit, insufficient liquidity, falling prices, and falling collateral value, triggering a series of asset depreciations, debt defaults, and corporate bankruptcies, leading to a rapid economic collapse. This problem is solved under the limited-term fiat currency system by relying on the ability of the central bank to provide unlimited liquidity. The Bitcoin system deprives the central bank of this ability, leading to concerns among the economics community and monetary authorities, and has also become an important reason for the negative attitude towards the development of Bitcoin at the institutional and legal levels.

5. Crime and money laundering risks brought by Bitcoin anonymity

Compared with legal currency bank system payment, Bitcoin payment does not need to disclose personal information and is anonymous. Although this anonymity is far less than that of metal currency and paper money (Bitcoin payment will retain all historical traces in the blockchain), due to its convenient payment feature based on the Internet, it has become a favorite tool for illegal transactions such as drugs and guns, extortion and money laundering. In the absence of a sound legal system, these improper uses of Bitcoin have caused certain damage to the development of the Bitcoin system.

6. Insufficient popularization and dissemination of Bitcoin knowledge

The development of currency requires the trust and application of the public, but the foundation of Bitcoin is not the natural attributes and state power that people are familiar with. Understanding the technical foundation and economic and social value of Bitcoin requires considerable professional knowledge. There are also some individuals and companies in the industry who focus on the popularization and dissemination of Bitcoin knowledge and consultation, but overall, popularization is far from enough, so that the demonization of Bitcoin and fraud activities in the name of Bitcoin are more prosperous than Bitcoin itself.

7. Lack of safe and convenient means of holding currency and payment

For those who have understood and accepted Bitcoin, the biggest problem at present is how to hold, receive and pay Bitcoin safely and conveniently. Since Bitcoin entered the public eye, there have been numerous security incidents, mainly due to the loss of private keys or theft by hackers. From many security incidents, the Bitcoin system itself is extremely secure, but there are many security loopholes in the process of individuals holding and receiving and paying Bitcoin. Many highly vigilant professional Bitcoin companies have been hacked by hackers, and even become the main reason for the collapse of Bitcoin companies. For safety, individuals can use cold wallets and offline signatures to solve the holding and payment problems, but the process is cumbersome and raises the threshold for use.

7. How to realize the payment advantages of Bitcoin?

From the perspective of the entire system, these advantages are significant and can generate huge economic dividends. However, whether these dividends can make Bitcoin successful depends on whether individuals are motivated to hold and use Bitcoin. At present, the obstacles facing Bitcoin payments are so obvious to individuals that it is understandable to question Bitcoin payments. So, can Bitcoin's payment advantages be achieved by micro-individuals?

1. Rationality and freedom are the two pillars of Bitcoin’s existence

If each micro-individual only considers the direct effect of each payment, then Bitcoin will never enter the payment field, because the earlier Bitcoin is used, the more obvious its disadvantages relative to legal currency payment will be, and the first transaction will never happen. However, people do not act only based on immediate interests, they have expectations and beliefs. Rational expectations will make some people see the payment advantages of Bitcoin, its great significance to the social economy and its development prospects. The yearning for freedom and the realization of self-worth make some of them willing to make efforts in the early stage to promote the development of Bitcoin, including trying Bitcoin payments. These people have been the core group promoting the development of Bitcoin before Bitcoin has crossed the threshold of the scale effect disadvantage relative to legal currency. As more and more people understand Bitcoin, this group continues to expand under the attraction of rationality and freedom.

2. Expansion of the market for storage, investment and speculation

The expansion of the core group gradually formed the Bitcoin trading market, first with legal tender, then with other commodities, such as pizza. The emergence of these two types of transactions has enabled Bitcoin to form real purchasing power and begin to have the function of storing value - believing in the advantages of Bitcoin, especially its anti-inflation characteristics, some people are willing to exchange part of their legal tender for Bitcoin as savings. With the formation of the trading market, the expansion of the payment scope and more people using it as savings, the market value of Bitcoin has gradually formed, and in the stage of rapid dissemination of Bitcoin knowledge, the market value has increased rapidly, thus making it an investment value for some people who appreciate Bitcoin. As a brand-new monetary system, Bitcoin has many uncertainties in many aspects of technology and system. Therefore, its market value is also highly volatile. In addition, the borderless characteristics of Bitcoin have brought about the internationalization of its trading market, as well as 24-hour uninterrupted trading, so that even speculators who have no good feelings towards the Bitcoin system can also show their skills. The growth of the demand for storage, investment and speculation has greatly expanded the scale, characteristic structure and spatial distribution of the population paying attention to Bitcoin on the basis of the core group.

3. Bitcoin’s characteristics have enabled certain special payment markets to take the lead

Bitcoin’s various features that distinguish it from legal tender systems make it more applicable in certain special payment scenarios, forming a stable payment application. At present, these payment scenarios mainly include:

1. Cross-border remittances. Cross-border remittances of fiat currency involve multiple banking services and exchange costs. Some companies have tried to provide cheaper remittance services using Bitcoin as a medium;

2. Cross-border large-value payments. When the payment amount is large, using Bitcoin for cross-border payments can also significantly save costs;

3. Virtual goods trading. For virtual goods or services that can be delivered online, such as music, games, software, and network services, it is very convenient to use Bitcoin transactions. PayPal was the first to introduce Bitcoin payments in music and game goods payments, and many VPN services also accept Bitcoin payments;

4. Private commodity payment. For legal but highly private commodity or service transactions such as adult products, the anonymity of Bitcoin is very attractive;

5. Bitcoin-related industry transactions. For transactions where both the buyer and seller are Bitcoin enthusiasts, such as mining equipment, hard wallets, etc., Bitcoin transactions are very common;

6. Other virtual currency transactions. On some virtual currency trading platforms, Bitcoin has become the main currency for pricing and trading of various other virtual currencies. These payment scenarios constitute a relatively stable payment application market for Bitcoin in the early days.

4. Business model innovation realizes macro dividends

The expansion of the core population, value savers, investors and speculators means that there are more and more people holding Bitcoin, and more and more potential Bitcoin payers. A considerable number of people here will try to use Bitcoin to pay for goods or services based on faith or curiosity. However, this payment application will not last long, because the scope of goods and services that can be purchased with Bitcoin in the early stage of its development is narrow, and it is too troublesome for individuals to pay with small amounts of Bitcoin compared to legal currency. Between 2013 and 2014, domestic industry pioneers tried to build an online merchant platform that accepts (or even only accepts) Bitcoin payments. They were supported by the industry, but failed to survive. The reason is that the advantages of Bitcoin payments are not enough to offset the disadvantages of a new online merchant in terms of operating level, market share, business channels, goodwill, etc. The Bitcoin system is unable to rebuild the entire business ecosystem, but can only gradually penetrate the original ecosystem.

At this stage, the more successful Bitcoin business expansion is to innovate business models. On the basis of maintaining the advantages of legal currency and bypassing the disadvantages of Bitcoin, the slight advantages of each Bitcoin payment are gathered to form corporate profits and achieve corporate growth. For example, Bitpay, Coinbase, Bitreserve, etc. provide merchants and consumers with services that simplify the exchange of Bitcoin and legal currency and avoid exchange rate risks. They use the low transaction fee advantage of Bitcoin to attract merchants and consumers to accept, pay or hold Bitcoin. As the number of transactions increases, the slight advantage of each transaction in terms of fees will be aggregated into the company's growing income. This will further increase the investment value of the company, attract venture capital to enter, and achieve a benign interaction between the company, the market and investors. With the continuous expansion of the Bitcoin-related population, the advantages of the Bitcoin system's openness and ease of innovation will be further exerted, and there will be more business models to promote the expansion of the entire business ecosystem. These business models will gradually turn the huge economic dividends of the Bitcoin system into profits and benefits for micro-enterprises and individuals, and become a micro-driving force for the development of the Bitcoin economy.

5. The development of science, technology and equipment promotes the popularization of applications

The lack of popularization of Bitcoin knowledge and the safety and convenience of holding and trading Bitcoin seriously restrict the expansion of Bitcoin support scope and scale, which has gradually attracted widespread attention in the industry, and many companies and individuals are committed to solving these problems. Now, articles, forums, books, videos and other content related to the dissemination of Bitcoin knowledge are rapidly accumulating, Bitcoin application software is becoming increasingly rich, and hardware devices that solve the problem of safe and convenient use of Bitcoin (such as hard wallets Trezor, BitTorrent cold wallets, Bwallet, Hardbit, Case, Coolwallet, etc.) are also constantly appearing. The current popularization of science and payment solutions are still in the exploratory stage. Among these explorations, some have predictable profits, such as popular science websites, hard wallets, etc.; some are promoted by interested companies. Bitcoin companies with greater influence often carry out some popularization and promotion activities; some are voluntarily carried out by volunteers who prefer rationality and freedom. Under the protection of the advantages and commercial value of the Bitcoin system, these explorations are continuous, will continue to accumulate, and gradually make breakthroughs in various aspects, and continue to promote the popularization of Bitcoin applications.

6. Various obstacles will have to be solved after crossing the scale threshold

With the expansion of the core population, the expansion of the scope and scale of value storage, investment, speculation, the continuous innovation of business models, and the development of popular science, applications and equipment, the application scope of Bitcoin payment has a micro-power to continue to expand. Once the scale of Bitcoin payment crosses a threshold, it does not require Bitcoin payment to exceed legal currency in total volume, but that Bitcoin payment can be used in the main aspects of people's economic life. At this time, the development of Bitcoin payment will enter a new stage: it can break away from the constraints of legal currency and independently complete a series of monetary functions such as pricing, payment, value storage, settlement and credit expansion. In this case, the advantages of Bitcoin payment can also be fully reflected at the micro level. Individuals use Bitcoin payment at a lower cost, lower risk and more convenient than legal currency, and the scope of Bitcoin application will accelerate. The widespread use of microeconomic entities will force the institutional and legal levels to make adaptive adjustments; economists and monetary authorities will also have to consider using new theories and policies to deal with the macro-control and deflation problems in the Bitcoin system; legislative, judicial and law enforcement agencies will also be pushed to deal with new crimes brought about by the new monetary system, which is essentially no different from the legal challenges brought about by other technological revolutions in history.

In summary, Bitcoin as a monetary system has significant advantages over other monetary systems. Its potential huge economic dividends will attract micro-subjects to participate in various forms at different stages of its development. The more participants there are, the more potential dividends will be converted into profits and benefits for micro-subjects, further attracting more micro-subjects to participate. Such a positive feedback mechanism will enable the Bitcoin system to overcome various obstacles and eventually replace the existing monetary system.

8. Conclusion

Bitcoin is a fundamental change to the monetary system. Its payment advantages are rooted in the innovation of its monetary nature, which is mainly reflected in three aspects: first, it can save various costs; second, it can prevent the erosion and abuse of centralized organizations; third, it is more conducive to technological and institutional innovation. These advantages will form huge economic dividends from a macro perspective and are expected to become a new growth point for the world economy.

In the early stages of development, the Bitcoin system did face great development obstacles compared to legal tender, and it is understandable to question its prospects as its price continues to fall. However, people's rational expectations, pursuit of freedom, and the realization of economic dividends through technological and institutional innovation can still continue to drive the development of Bitcoin. Even in the process of price fluctuations since 2014, the Bitcoin economic system is still becoming increasingly robust.

The more you can tolerate, the better you will be. In the final analysis, the advantage of Bitcoin as a payment system is that it is the result of the evolution of the human currency system and the crystallization of human knowledge. It can do everything that previous payment systems can do, and it can do it better, and it has more advantages that other systems cannot do. Now, the important thing is how to quickly overcome the obstacles that the Bitcoin system faces in its early stages of development so that the economic dividends of the currency system innovation can benefit you and me as soon as possible.