Source: Qie Qie and Qie
Has Bitcoin really reached the $100,000 threshold?
As a string of code, what value does Bitcoin have to reach such heights today? What is its underlying logic? Why is it called "digital gold", and is it related to currency? Let's start with the concept of currency.
I.The Value of Currency
One coin is worth $100,000, equivalent to over 700,000 Chinese yuan. $100,000 is a symbolic milestone, just like when it broke $1,000 and $50,000. It may hover around this milestone or even retreat, and then continue to surge upward. Of course, it may also become worthless one day.
Whether it's worth it or not, aside from the technical maintenance, the more important factor is how people value it. If one person thinks it has value, it has value to that person; if a group of people think it has value, it can circulate among that group; when everyone recognizes its value, it can circulate among everyone.
So the debate about whether Bitcoin is a currency or not is meaningless. Nowadays, in some parts of the Earth, it has already become a currency, people are using it for transactions, the kind of daily life transactions, it circulates among that group, so it is a currency. In some places, there are not yet the conditions to use it as a medium of exchange in daily life, so it is not a currency, at most an investment product.
Whether it's currency, investment product, capital goods, or consumer goods, the value of anything is bestowed by people. Currency is relatively special in this regard, as it indeed bears a great responsibility.
In my previous article, I said that people need to have valuable skills, and then I thought of a sentence from "The Future of Money", "If the currency held by others is harder than yours, you cannot stay out of it". The currency you hold must also be valuable.
"Hard" currency means that the currency is valuable. The meaning of a currency being valuable is that its purchasing power is strong and can be maintained or even increased. The primary function of money is as a medium of exchange, and people use money to buy things, so its value is naturally determined by its purchasing power.
So in addition to having valuable skills, it's best to also have valuable assets to anchor your wealth, otherwise you'll just be looted by inflation. This is not a call to action, just a statement of fact. Even if you have skills and can make money, under the dilution of inflation, you'll have to give away half of your labor output to others.
II.What is a Good Currency
Since gold was taken over by central banks around the world and reduced to an investment product and decoration, there has never been a decent currency in this world, and the US dollar is just a slightly less garbage one among the many garbage currencies.
What is a decent currency? It depends on what conditions it must meet to maintain its purchasing power.
In "The Future of Money", the author, based on the theory of Austrian economics, gives the standard - the three-dimensional marketability of a currency determines its quality as a currency.
The first is marketability in the transaction scale. That is, it can be freely divided, and each unit has the same physical properties, to facilitate transactions of various denominations.
Gold basically meets this requirement, but paper currency is superior to gold, which is also one of the reasons why people initially accepted currency certificates. Yes, at that time, paper currency was still called "currency certificates".
The second is spatial marketability, whether it is convenient to carry, for cross-regional transactions. Gold is not very ideal in this respect, which gave an opportunity for paper currency later.
The initial paper currency was just a currency certificate, people kept the real currency - metal currency in the bank, the bank managed it on behalf of the customers, and gave the customers a currency certificate to retrieve the currency later. This was the way the gold standard system worked, supplementing the shortcomings of precious metals as currency.
The third and most important condition is temporal marketability, that is, its ability to retain value. Resistance to corrosion and stable properties are essential. In addition, the increase in the money supply cannot be too easy, there is a concept called the stock-to-flow ratio. If the flow is very small relative to the stock, that is, the speed of increase of this currency is very slow, then the risk of new money diluting its own purchasing power will be very small, and the currency's ability to retain value will naturally be strong.
In this regard, gold is the undisputed currency of choice. Its chemical properties are stable and not easily damaged, and it cannot be artificially synthesized, with a fixed stock on Earth. Its increase as a currency depends only on the mining speed, and the difficulty of mining and extraction is also great, so it has become the hardest currency in history. Generation after generation has used it to store their wealth, and it is still the most important investment product today.
Under the gold standard system, currency certificates are not real currency, but currency substitutes. In theory, banks can only issue currency certificates equivalent to the gold reserves, otherwise they will face the risk of a bank run. A bank run means that the bank's customers all come to demand the gold back, but the bank cannot provide enough gold due to over-issuing the currency certificates, at which point the bank will seriously lose credibility and even go bankrupt. Therefore, the bank's ability to create inflation is greatly limited.
However, the right to mint coins has gradually been completely monopolized by the modern banking system in its gradual decline, and currency certificates have gradually evolved into fiat currency, until they were decoupled from gold, and then completely set free. Monopolists have never been able to control their own hands in printing money, and creating inflation is as simple as eating and drinking. The history of fiat currency is a history of one round of inflation after another, and now people always lament that money is worth less and less, which is a true feeling of inflation.
III.What's so Great about Bitcoin
As long as Bitcoin's technology is not attacked and broken, it perfectly meets the above standards.
First, the marketability in the transaction scale. The smallest unit of Bitcoin, "Satoshi", is 1/100 millionth of a coin. If one day a coin is worth a hundred million, then one Satoshi will be equivalent to one dollar. I've explained this in such detail to make it clear that you don't have to own a whole coin to own Bitcoin, you can own 0.001 coins, and the divisibility is superior to any currency in human history.
Second, the spatial marketability, cross-regional transactions. You only need a blockchain wallet address, which is a string of code, to store all your Bitcoins. Of course, you can also store them in multiple addresses, and then use them for transactions when the conditions allow.
Third, the temporal marketability, the ability to retain value. The predetermined algorithm of Bitcoin determines its absolute mining limit, and it becomes increasingly difficult to mine as time goes on, with an extremely high stock-to-flow ratio. The mining speed has already slowed down significantly, and it's hard to imagine how valuable a coin will be when it approaches the limit.
Of course, Bitcoin also has the risk of being attacked and collapsing, but it also has very strong defense mechanisms. I don't understand the technology, so I can only simply share my understanding. This understanding may be biased, and I suggest that friends who want to learn more go and read specialized materials, such as the easy-to-understand "The Future of Money" that is suitable for us beginners.
This is a very cumbersome verification mechanism, which solves the problem of trust. You can understand it as a ledger, and the information recorded in the ledger is valid, so the coins in your wallet are valid. Every new addition and transaction of on the blockchain needs to be recorded in each participating network node, and it needs to be verified by each node. The only way to attack is to shut down every server running it, but this is almost impossible, as there are countless people using it worldwide.
In simple terms, the blockchain is using digital encoding technology to simulate gold, realizing the function of gold as a medium of exchange. Whether it succeeds or not depends on how much consensus is formed, and then it's just a matter of waiting for recognition. The current soaring prices are a kind of recognition, and real gold and silver are the most reliable, and the flow of money indicates where the most trusted place is.
Of course, I'm not encouraging everyone to go buy it. Investing has risks, the money is your own, the future is unpredictable, who knows if you'll buy at the high or the low, whether it will succeed or not.
This does not affect my admiration for its awesomeness. People have long forgotten what real currency is, and there are few opportunities to cultivate the right understanding of currency. has stimulated us with wave after wave of profits, shocking our concepts, and many people have had the opportunity to regain the distant memory of honest currency.
So whether it succeeds or not, it doesn't affect it becoming a great currency practice.
