Babbitt column | The core function of Bitcoin, is it stored value or paid?

I. Introduction

Over the past few days, Babbitt’s article on the value storage and payment functions of Bitcoin has increased. Is the core function of Bitcoin stored or paid? This is a lot of questions that are discussed in the Bitcoin circle.

The core function that supports Bitcoin is that people who value stored value say this:

The core application of Bitcoin is stored value, and its future goal is to become the first choice for people's stored value.

The core function of supporting Bitcoin is that the payer is saying this:

A thing that is not used, unfamiliar, and has no IP. Why would anyone think of storing value? Will you store your value in platinum? How scarce is buying a house in a different place, don't you know?

There are no huge transactions and “stored value” tools that a large number of users support behind, just like passive water. At present, the difference in the understanding of the core functions of Bitcoin is not only a matter of conception, but has risen to the line of contention. At present, Bitcoin itself has begun to take the stored value route. Bitcoin core developer Jimmy Song once said that bitcoin is a value storage method like stocks and real estate.

This is actually a major direction choice, but many people are not aware of it. The fork in this direction is more worthy of our consideration: The core function of Bitcoin is whether it is stored value or paid?

Second, the original intention of Nakamoto

As the founder and spiritual leader of Bitcoin, we may be able to find clues from Nakamoto:

1. The first detail: Nakamoto's white paper is called "Bitcoin: A Peer-to-Peer Electronic Cash System", which is called "Bitcoin – A Peer-to-Peer Electronic Cash System" in English, regardless of the Chinese title. "Electronic cash", or "Electronic Cash" in the English title, is plainly referring to cash, not gold, and cash is of course used to pay.

2, the second detail: January 3, 2009 at 18:15:05, the Bitcoin Creation Zone was born. In this block, Nakamoto has left the title of the front page of The Times – The Times 03/Jan/2009 Chancellor on brink of second bailout for banks (January 3, 2009, the Chancellor of the Exchequer On the verge of implementing the second round of bank emergency assistance).

Later generations explained that Satoshi Nakamoto wrote this passage in the creation zone to ridicule the traditional financial system and satirize the currency super-issuance. It should be noted that his ironic object here is French currency instead of gold. That is to say, in Nakamoto's heart, the bitcoin is the legal currency, not the gold.

3. In the introduction to the first paragraph of the opening paragraph of the white paper, Nakamoto used a lot of space to describe what problems Bitcoin is used to solve. The excerpts are as follows:

Trade on the Internet almost requires financial institutions to act as trusted third parties to process electronic payment information. While such systems work well in most cases, such systems are still endogenously constrained by the weakness of the "trust based model." We cannot achieve completely irreversible transactions because financial institutions will inevitably come forward to coordinate disputes . The existence of financial intermediaries will also increase the cost of transactions, and limit the practical minimum transaction size , but also limit the daily micropayment transactions. And the potential loss is that many goods and services cannot be returned by themselves. If there is no irreversible means of payment, the trade of the Internet is greatly limited. Because of the potential for a refund, the parties to the transaction need to have trust. Merchants must also be wary of their customers , so they will ask customers for completely unnecessary personal information . In actual business practices, a certain percentage of fraudulent customers are also considered inevitable, and related losses are treated as sales expenses . In the case of physical cash, these sales expenses and uncertainty in payment issues can be avoided because there is no third-party credit intermediary.

Look at the keywords here: daily, micropayments, buyers, sellers, fraud, transactions, intermediaries, goods, services, sales expenses, irreversibles, etc., no matter from which point of view, here are written bitcoin in commercial transactions The application; if only the stored value function is considered, these words are not used at all.

These are just the words of Nakamoto Satoshi on the white paper. The white paper on Bitcoin is very refined. He revealed more information in the forum:

(Zhong Bencong mentioned in the forum on the possible scene of the first use of Bitcoin in the forum.) The first use of Bitcoin may be a small payment . He also suggested that celebrities should start using it first, so fans can give They send private messages.

If there are hundreds of millions of users involved in the transaction , everyone must know all or most of the transaction records, and so on. . .

Visa credit cards processed 37 billion transactions in fiscal 2008, an average of 100 million times a day. . . 4, Bitcoin set up simplified payment verification SPV, UTXO and other functions, these are designed for trading, payment, if only to store the value, then these systems are largely unusable.

Third, the payment function and stored value function, who is fundamental?

When it comes to the stored value function, there are always people who cite such an example. They say that gold does not have a payment function, but it can afford the stored value function very well; Bitcoin is also known as "digital gold". It is also possible to weaken the payment function and emphasize the stored value function.

However, the state of gold today has a special historical reason. In history, gold was used to pay for it. It was mainly used to pay for the payment function. After the banknotes appeared, gold gradually withdrew from the historical stage, but until today, most central banks still have sufficient gold reserves, which are the national banknotes. Part of the credit guarantee, which is why gold is still useful and still able to take on value storage capabilities.

In other words, the role of gold in stored value is brought about by the previous payment function, which has continued to the present due to historical reasons, and even today, gold still has a trading market. But this does not mean that Bitcoin, the "digital gold" can also not pay for the function, as long as the stored value function. For example, we can also give examples of silver. Silver, like gold, has also played a role in daily payments, but today silver has completely withdrawn from the market. When the payment function is lost, it does not continue to bear the function of stored value.

Moreover, these things are real in gold, their functions can be single, they can not flow; but digital currency is virtual, and flow is its nature . If you artificially abandon the payment function, it is equivalent to artificially cutting the liquidity. Bitcoin is not complete.

You can imagine such a virtual scene: At present, the renminbi is the legal currency of China, and it can be used for anything. You can use it for borrowing, investing, using it, using it for trading transfers, and so on. However, if the country reissues several RMB and casts some of its functions, we call it a limited version of the RMB. For example, Class A RMB can only be used for investment, and Class B RMB can only be used for consumption. If the renminbi can also be circulated, then it can be expected that these two types of renminbi with limited functions will certainly not be as popular as the full-featured renminbi, and the price may be very expensive. This is the case with money. The more functions, the more applicable scenarios, the better its liquidity, the wider the acceptance, and the greater the consensus .

I once gave examples, saying that in 2017, some of my friends who came out of the game came in and wanted to buy a few bitcoins first. At that time, when Bitcoin trading was very congested, he bought some bitcoins on the exchange. I want to go to the wallet store. After waiting for two or three days, I didn’t get the account. He thought that he had done the wrong operation because the amount was still relatively large, so he was very nervous at the time. Later I helped him to read it. The operation is correct, only It’s just congestion.

Many newcomers and friends have no faith in Bitcoin. They just entered the market just because they just heard about Bitcoin recently. They think that the rise of Bitcoin will bring him investment income. If Bitcoin “scares” him so much, and he finds that other digital currencies are still doing well, he will not hesitate to choose other digital currencies.

Nakamoto is very concerned about the "user experience". He mentioned this word many times in the forum. If he knows the user experience that Bitcoin brings to us today, I don't know how he feels.

Going back to the above topic, that is to say, a bitcoin with only stored value function or stored value function must be better than a bitcoin with both stored value and payment function, but it must be more than one. Full-featured bitcoin such as payment, financing, and investment.

This also means that with the development of the world, the bitcoin function should be gradually increasing. If the function does not increase, then many functions of Bitcoin as a digital currency will be robbed by other competitors, such as investment functions. It was robbed by Ethereum and the payment function was robbed by BCH, making Bitcoin a limited version of Bitcoin or a bitten version of Bitcoin.

Regarding the stored value function and the payment function who is the fundamental problem, I think the answer is clear: the payment function is the fundamental of the currency, the stored value function is attached; the stored value function can only be attached to the payment function and cannot exist alone. If the Bitcoin pure stored value system does not make a payment system, then Bitcoin has no value base; but conversely, if Bitcoin focuses on the payment system, the stored value system is naturally attached.

The original intention of Bitcoin is designed for payment. The stored value function is built-in after the payment is perfected. It is definitely not the reverse of bitcoin design for the stored value. The payment function is only incidental or not critical. This focus must not be reversed. . And not only is the payment function more important, but the currency should have the function of bitcoin. If bitcoin cannot perform these functions because of block size or other various restrictions, then this will cause bitcoin competitiveness and The market share has decreased.

Fourth, from the perspective of price fluctuations

If you want to bear the stored value function, the price of the currency and the asset itself is generally required to be stable. However, when the current price fluctuates greatly, even if the fluctuation of the single day can reach 20-30%, many people still expect to rely on it to realize the stored value function. In fact, it is essentially an investment product, and it believes that its future price will rise for a long time, or at least for a long time to remain stable.

For Bitcoin, the possibility that the price will remain unchanged for a long time is very small, and it can be basically ruled out. In the long run, it will be a skyrocketing or a plunge. If you expect Bitcoin to take on the stored value function, in fact, it is expected that the future price of Bitcoin will rise for a long time. After all, in the long run, the price drop is unable to store value.

At this time, you need to think clearly, what is your stored value, in essence, whether it is stored value or investment?

The long-term growth of Bitcoin's prices depends on “screaming” and “belief”. In the long run, the reason why bitcoin prices can get higher and higher, there is only one possibility – more and more people use bitcoin, more and more people hold bitcoin, this is the value of bitcoin The real source. When the investment and financing functions of Bitcoin have been lost and the payment function has been shrinking, the realization of this goal can only rely entirely on the stored value function.

However, if there are no other functions, only the stored value function, the logic becomes: the reason why the value can be stored is because the price will rise; and the reason why the price will rise is because it can store the value of the loop.

V. Conclusion

1. Bitcoin cannot be used solely for value storage;

2. Value storage is an affiliate function, not a core function;

3. With the payment function, the value storage function is natural; but the reverse is not true;

4. Even for the purpose of value storage, the payment function should be extended as much as possible.