The Nature and Future of Bitcoin

OKcoin founder and CEO Xu Mingxing: Today I will introduce what the essence of Bitcoin is and how it will develop in the future. Bitcoin is essentially a kind of credit on the Internet. The basis of credit is mathematical design and the computing power of the network. This kind of credit is cross-border and cross-company. There are many ways to establish credit. Everyone has his own credit. Tencent relies on the company's strength as the basis of credit to issue QQ coins. The country issues national credit based on sovereignty. I call this credit social credit. Primitive people used shells as credit, and later the world used gold and silver as credit. I call this credit natural credit. The basis of credit is its own attributes. Gold and silver themselves have no value, but they are recognized by people all over the world because of their special attributes. Some people think that social credit is reliable, and some people think that natural credit is more reliable. Everyone has their own choice and right to believe.

Bitcoin is the natural credit of the Internet era. Its credit is based on the mathematical design of Bitcoin itself and the computing power of the Bitcoin network. As credit on the Internet, Bitcoin has some advantages, such as low circulation cost and high efficiency on a global scale, and no inflation itself. There are also some disadvantages, such as short appearance time and large credit fluctuations. This is a prediction about the future of Bitcoin written by a16Z, a well-known Silicon Valley venture capitalist (http://a16z.com/2015/01/22/bitcoin-and-blockchain/). A16Z is the top VC in the United States, investing in all famous companies such as Google and Facebook. They are also very important promoters of Bitcoin. In recent years, Bitcoin may have great applications in several fields: 1. Spend very little money, such as 0.0000001 yuan, which cannot be paid by RMB. Someone in the United States is building a wifi network, and everyone can share wifi with others for a very small amount of money; 2. Some anonymous transactions; 3. International transactions. These three major applications are his views. Bitcoin can greatly promote circulation on a global scale and have positive significance for the development of economy and technology. Our company and domestic peers will use Bitcoin when doing some transactions.

There is another concept about Bitcoin, Bitcoin technology. Bitcoin has established a kind of credit through technology, but Bitcoin technology has many other applications. At present, Bitcoin technology mainly has the following types of applications: 1. Smart contracts. Traditional integration must have a third party to supervise the execution, such as an intermediary agency or a court. Smart contracts made using Bitcoin technology can trade and put the bonus on the network, and set the network to get the result from a certain data source at a certain time, and automatically execute the contract; 2. Proof of data integrity. Bitcoin's blockchain is guaranteed by the world's huge computing power and is difficult to forge. People can write the signature of the data into the blockchain at regular intervals. In the future, all customers can verify the integrity of the data through the Bitcoin network. Some companies abroad write the transfer information of real estate on the Bitcoin network, so there is no need to worry about the construction committee database being hacked and your house property rights being unclear; 3. Issuance of community coins. Many communities can issue their own points on Bitcoin and guarantee their credit through blockchain. These are the main applications of Bitcoin technology at present.

Q: Since Bitcoin is natural credit, what are these algorithms calculating?

A: Bitcoin’s mathematical design gives it properties similar to gold, such as limited total volume, dispersed distribution, moderate and increasing mining difficulty, inability to be forged, and soft and easy to split. Computing is actually to achieve these properties.

Question: How is it currently being applied in the real economy?

Answer: Many foreign merchants support Bitcoin payments and can collect payments from customers around the world. Major companies such as Dell, Newegg, Overstock, Microsoft, and Expedia all support it.

Question: The currency issue is not like Internet finance or Yu’ebao. The currency issue is a regime issue.

A: Bitcoin is not a universal currency. Like QQ coins, it is a virtual currency used by specific groups of people and in specific fields. Currently, mainstream countries around the world have legalized Bitcoin, including China. Chinese regulators define Bitcoin as a virtual commodity.

Q: What do you think is the actual value of Bitcoin?

Answer: The price of Bitcoin depends on the scale of the largest Bitcoin economy. No one can predict the specific price, just like foreign exchange and stocks.

Question: It was very hot in the past few years, but it seems to have stabilized recently. What do you think, Mr. Xu?

Answer: It was hot before because Chinese hot money was speculating on Bitcoin. Now it has returned to the stage of rationally developing Bitcoin applications.

Question: Once it becomes a mass consumer product, no country can tolerate it. Just like Fireball.com, even it doesn’t dare to expand because of its limited payment capacity.

A: Bitcoin is a mathematical credit. In our lifetime, it will be used by a specific group of people in a specific field. If 50 million people around the world use it, it will be like a virtual country. Whether it is big or not depends on its own development.

Q: The development of Bitcoin is secondary to the market. In the United States, if it has an impact on the US dollar, what will the US government do? It depends on what the commodity is.

A: Gold is a currency that no government in the world can control. The key is whether it can develop into the mainstream. Its characteristic is whether it can be accepted by the public. The market will always be stronger than the government. Bitcoin has always been used by people who like to accept it. People who don't like it don't care about its credit. The development of Bitcoin depends on itself. Any commercial promotion is useless.

Q: What is the business model of Bitcoin startups?

A: There are many types of Bitcoin companies, including wallets, payment companies, trading platforms, banks, etc. Wallets generally make money from service fees, payment companies charge payment fees, trading platforms charge transaction fees, and banks charge interest. Each company has a different business model.

Q: Mr. Xu, could you please introduce your company?

A: We have two platforms, oklink and okcoin. oklink.com is a bitcoin wallet and payment platform that provides an easy-to-use bitcoin wallet without the technical concepts of bitcoin. It also provides merchant tools to facilitate merchant access. Okcoin has a Chinese site, okcoin.cn, and an international site, okcoin.com. The Chinese site is for buying and selling bitcoins in RMB, and the international site is for buying and selling bitcoins in US dollars. The Chinese site and the international site are not connected in accounts and are operated by different companies.

Q: What kind of companies might use a Bitcoin wallet?

Answer: Some startups in the United States use Bitcoin to pay wages, which can reasonably avoid taxes.

Q: Mr. Xu, how do you promote OKLink? Do you have a merchant version? How well do merchants accept it?

Answer: We have only recently started OKLink, and currently there are dozens of merchants connected.

Q: What types of merchants are eligible for access?

Answer: Foreign trade, mostly games.

Audience: The first people to accept Bitcoin were merchants with strong Internet thinking, and the first to speculate on it were even more so.

Q: Mr. Xu, could you please give some advice to the cryptocurrency community?

Answer: Those who trade Bitcoin need to control risks according to their own circumstances.

Q: Mr. Xu means that Bitcoin is a platform, and there is no prediction on how big it will be in the future?

A: The development of Bitcoin depends on its applications. We should develop many applications that Bitcoin has advantages in. It’s not that we don’t give predictions, it’s that we can’t predict. Bitcoin is a social experiment, and no one knows whether it will succeed.

Audience: That’s right, speculation is gambling, we can use it, only those who love speculation can do it. We can choose the future direction by ourselves, and there is no need to make predictions that are recognized by the public.

Q: Could you please give some advice to virtual currency entrepreneurs?

A: Starting a virtual currency business is very risky, because the premise of success is the success of virtual currency; the application of virtual currency may have great opportunities. I have these two simple suggestions. Thank you, if you have any other questions, please contact me separately.