What kind of currency is Bitcoin?

This article attempts to analyze the monetary properties of Bitcoin from the perspective of the currency's usage scenarios, or to analyze the monetary properties of Bitcoin through its usability.

Chapter 1 The Four Attributes of Currency

General thinking tells us that money or currency is a medium of exchange or a general equivalent. For example, the US dollar is globally accepted and is very successful. That is, the US dollar can be used to purchase goods and services around the world. A medium of exchange can be called money if it can be used to purchase goods and services. Here we call it the first major use of money, which is "cash purchase".

We still call gold a hard currency, but gold is rarely used as "cash" to buy goods and services. However, gold is a global currency for storing value. The ability to store value is also a property that a currency must satisfy. That is to say, a transaction medium can be called a currency. It must be able to undertake the "cash purchase" function now and in the future. (The amount of goods and services that can be purchased is allowed to fluctuate.) We can call this characteristic "value storage", that is, holding it to meet the need to exchange goods and services as "cash" at some point in the future.

When we sign a contract with others, we mark the contract amount in RMB, or we receive a certain amount of RMB as salary at the end of the month. At this time, RMB, as a currency, is neither "cash purchase" nor "stored value", but a standard for delayed payment. Although similar to "stored value", "stored value" only involves the holder himself, but delayed payment involves the credit and debit of the currency. Faced with these two identities, the tendency of "stored value" of currency is different. For example, when paying wages, after the boss signs a contract with you, for example, 100 currency units are set for a month, the boss hopes that the currency will depreciate, while you hope that the currency will appreciate. For a transaction medium to become a currency, it must be able to balance the concerns of both parties about delayed payment, otherwise one party will be unwilling to sign a contract with this currency. We call it the "delayed payment standard" of currency.

Now when countries around the world compare their gross national products, they use US dollars to calculate. For example, my country's GDP last year was 2 billion US dollars, and Japan's was 1 billion US dollars. For another example, we will summarize our balance sheet as how much RMB our total assets are to evaluate our total wealth. We will compare our monthly salary with others to measure our income ability. The US dollar and RMB here act as an accounting unit to calculate economic behavior. We call this the "accounting unit" attribute of currency.

The properties of the above four currencies are summarized as follows:

1. Purchase with cash.

2. Storage of value.

3. Delayed payment.

4. Accounting unit.

Chapter 2 Bitcoin’s Monetary Properties

This article will evaluate what kind of currency Bitcoin is currently based on these four attributes, and try to compare it with the RMB, US dollar and gold.

1. Cash Purchase

For ordinary people like us, the most important function of currency is to pay for daily consumption. We go to the vegetable market to buy vegetables with RMB, and we go to the restaurant to buy meals with RMB...

There are not many things that can be purchased directly with Bitcoin in China. I once heard that drinks can be purchased with Bitcoin at Garage Coffee in Beijing, so I went there on purpose. The waiter asked me what Bitcoin was. Later I learned that only a few specific "waiters", such as Erbao, would accept Bitcoin payments.

I have used Bitcoin to purchase a VPN. I bought a one-month subscription and spent 0.01 BTC.

I bought a mining machine and it cost me 1BTC.

I have used Bitcoin to buy tea. I spent 0.1BTC to buy an iron box of tea.

I bought a book and it cost me 0.01 BTC.

The above is my own experience using Bitcoin’s “cash purchase” feature.

It can be said that currently in China, the "cash purchase" function of Bitcoin is very limited.

But in the United States, Bitcoin's "cash purchase" function is slightly more perfect. In 2014, a family in the United States traveled in the United States for a week using only Bitcoin, and a couple lived for 101 days using only Bitcoin. You can use Bitcoin to buy computers at Dell's online store, and you can also use Bitcoin to buy goods at Oversock. You can even use Bitcoin to buy a gift card and then go to Walmart to buy things. Some Microsoft products can also be purchased with Bitcoin. Now, in the United States, it is completely possible to live uncomfortably through Bitcoin's "cash purchase" function. (Remember, it is uncomfortable)

In Europe, there are not many places where Bitcoin can be spent. It is slightly better than in China, at least it can be used to buy food.

CoinDesk estimates the number of merchants accepting Bitcoin at 100,000.

If the "cash purchase" function of RMB in China is 100 points, then Bitcoin's score in China can only reach 10 points. If you only hold Bitcoin, you will starve to death in China.

If the "cash purchase" function of the US dollar in the United States is 100 points, Bitcoin can score 60 points in this function in the United States. However, the US dollar's score in China is estimated to be only 30 points. If you hold US dollars, you may starve to death in China.

2. Store of Value

After we receive our salary, in addition to spending it on daily expenses, another thing we care about most is the stability of the currency value. When we hold a certain currency, we definitely like it to be a currency that tends to appreciate. If not, we tend to spend it in a timely manner.

As a legal tender, the RMB is almost certain to depreciate, because the right to issue the RMB is controlled by government agencies, and the government will definitely abuse this power. Once the amount of RMB issued exceeds the total amount of wealth corresponding to the RMB, the RMB will depreciate.

The supply of Bitcoin is governed by mathematical laws. Currently, 25 BTC are issued every 10 minutes on average, and the output is halved every four years on average. The next halving will occur in the second half of 2016. By 2140, Bitcoin will be almost completely issued, with a total of 21 million.

The demand for Bitcoin is affected by the popularity of Bitcoin, as well as the launch and promotion of Bitcoin applications. Currently, there are about 10 million Bitcoin enthusiasts worldwide. Whether the acceptance of Bitcoin can be further expanded and whether Bitcoin can be applied in a wider market field, the answer is almost certain. Although there are no sufficient and necessary conditions, the following reasons can be used for reference.

1. Venture capital investment in Bitcoin continues to increase, and has now reached $800 million.

2. More and more merchants accept Bitcoin. According to CoinDesk data, there are currently 100,000 merchants accepting Bitcoin.

3. The number of Bitcoin transactions is increasing. Currently, the average number of transactions in a block is more than 600, more than twice as long as at the beginning of last year.

4. Bitcoin computing power is increasing, and has now reached 380P, an increase of more than 30 times compared to the beginning of last year.

The above data shows that Bitcoin is being sought after by capital and is being accepted by an increasing number of people.

The supply is predictable and the demand is growing. So it can be roughly inferred that Bitcoin is on an appreciation channel.

If the value storage function of gold is 80 points, the US dollar is 60 points, and the RMB is 30 points, then Bitcoin should be more than 90 points.

3. Delayed Payment

The creditor (equivalent to Party A of the contract, or the payee) and the borrower (equivalent to Party B of the contract, or the payee) who are delaying payment have exactly opposite expectations for the value of the payment currency that is due. The payer needs the currency to depreciate after the contract is signed, while the payee hopes for appreciation.

If the price of a currency is very stable, it will be more conducive to delaying payment because the expectations of both parties about the currency will be more balanced.

In international trade, the US dollar is often used for pricing. This is because the US dollar is one of the most powerful currencies in purchasing power, and both parties have reasonable expectations for delayed payment. In regional trade, such as business dealings between China and Vietnam, in addition to the US dollar, there are often RMB, but very few contracts are signed in Vietnamese Dong. This is because the price of RMB is more stable than that of Vietnamese Dong.

Nowadays, few people use Bitcoin as the contract price when signing a contract, but there are some.

It is said that in 2013, Btc123 attracted a lot of advertisements due to its large traffic. At that time, the advertisements all signed contracts with Bitcoin as the currency unit. The price of Bitcoin fluctuated greatly from 2013 to 2014. It is unknown whether both parties of the contract complied with the contract requirements.

Now the sharing and coin-giving activity of Bikan is also priced in Bitcoin, which also uses Bitcoin's delayed payment.

The interest on haobtc deposits is calculated in Bitcoin, which also uses delayed payment of Bitcoin.

There are many activities in the cryptocurrency circle that promise to pay out funds in Bitcoin after the activities are over. This is also a delayed payment.

After losing the user's bitcoin, the Bitcoin piggy bank signed a compensation agreement with the user based on 1,500 RMB for one bitcoin, rather than a certain amount of bitcoin. This is the use of the delayed payment function of RMB, but the delayed payment function of Bitcoin.

Some Bitcoin-related companies, such as HaoBTC and BitKan, pay wages in Bitcoin. However, this should not be considered as delayed payment of Bitcoin, because the company and employees negotiated in RMB when signing the contract. Then, when paying wages, the RMB amount agreed in the contract was converted into Bitcoin at the exchange rate between Bitcoin and RMB at that time, and then paid. This is essentially a "cash purchase" of Bitcoin. That is, the company used Bitcoin to purchase the RMB of employees.

Unless the company and the employee sign a contract denominated in Bitcoin, such as 10 BTC per month, it is considered to be using Bitcoin's delayed payment function.

Currently, Bitcoin's delayed payment function is still basically used in some small payments and Bitcoin financial management, such as giving away coins in activities.

If the delayed payment function of RMB can be rated 100 points, Bitcoin can only be rated 5 points. It is still a baby.

4. Accounting Unit

In our daily economic activities, we must have a calculation tool to measure gains and losses. To be able to make successful economic calculations, we must use a currency with a stable value. If the value of the currency itself is unstable, you cannot calculate the costs and expected benefits of economic activities.

For example, a company's balance sheet is calculated in RMB. If the RMB value is generally stable, the company's profits can be analyzed from the balance sheet.

A person's bank deposits are recorded in RMB, and his movable and immovable properties can be converted into RMB. By analyzing the individual's wealth, the girl will decide whether to marry him.

My balance sheet is calculated in RMB. One of the assets in it is Bitcoin, which is converted into RMB every month according to the exchange rate when the table was made to calculate my wealth.

Some people who trade in cryptocurrencies value Bitcoin more and despise the RMB. They often aim to make money and measure their rate of return by the increase or decrease in the amount of Bitcoin. This is the use of Bitcoin's accounting unit function.

Mr. Li has over 100,000 bitcoins, showing off his wealth. This is an accounting unit that uses bitcoins.

Most Bitcoin companies also report the rate of increase in legal currency when they mention their profitability. In the balance sheet of a Bitcoin company, Bitcoin is also recorded as an asset, and the accounting unit is legal currency such as RMB or USD.

If the accounting unit function of RMB is worth 100 points, then Bitcoin is worth about 30 points.

Chapter 3 Summary

Comparison of the currency functional attributes of Bitcoin, US dollar, RMB, and gold/percentage system.

Conclusion:

Bitcoin's currency status has been confirmed without a doubt, but its current currency function and currency status are particularly weak, but its future is limitless.

Just like a newborn baby, it is definitely a human being, but its various functions and social status as a human being are almost zero, but its future is limitless.