Written by: Parker Lewis, Head of Business Development, Unchained Capital
Compilation: Perry Wang
Source: Chain News
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When it comes to bitcoin's popularity, two rules seem to never go wrong. One is that everyone thinks they bought too late, and the other is that everyone wants to buy more.
There are exceptions to every rule, but Bitcoin is incredibly distracting. It was found that the total circulation of 21 million was such a small number. And, as more and more people realize that Bitcoin's fixed circulation is reliably guaranteed and that various currency networks will converge on a single medium, 21 million will become even smaller.
The increasing credibility of Bitcoin's currency attributes, coupled with the convergence of currencies, has driven a greater demand for Bitcoin, and this demand has exacerbated the scarcity of Bitcoin's fixed supply.
Therefore, as a monetary medium, its value is constantly increasing. This becomes more apparent as people learn more about the labyrinthine world of Bitcoin. However, it is not difficult for outsiders to find that there are too many similar cryptocurrencies. Admittedly, Bitcoin is now "leading", but there are still thousands of cryptocurrencies on the market. How can you be sure that Bitcoin will not become the star that Myspace temporarily leads and eventually disappears? How can you be sure that nothing will replace Bitcoin?
Will Bitcoin become the dominant global currency? This idea may sound crazy, but it is still possible if evaluated from a top-down, probability-weighted perspective.
Currently, Bitcoin has more than 1,000 digital currency competitors, and they don't look too different. Bitcoin's current purchasing power is $ 150 billion, which is only a fraction of the cost of a global financial system that supports $ 250 trillion in debt. The purchasing power of gold alone is $ 8 trillion (equivalent to 50 times Bitcoin). Born on the ashes of the 2008 financial tsunami, and only 11 years old, is there a great chance that Bitcoin will become a dominant global currency from scratch? The idea sounds ridiculous, or it seems too unlikely to be worth considering. However, if you look at it from the bottom up and reason based on several basic principles, then more than 1,000 other cryptocurrencies are reduced to background noise. When various factors are combined, a few basic principles can make things that seem complicated and indistinguishable simple and clear. Finding the right solution out of a thousand possibilities seems completely impossible and not feasible. But if 999 of these possibilities are eliminated based on one or more basic principles, the feasibility of finding a reasonable answer is greatly improved.
This is the roadmap to eliminate noise and focus on what really matters. Everyone may come to different conclusions on these issues, but this is a path to help us understand why Bitcoin has always outperformed all other currencies and whether it will continue to be so in the future.
Money is a basic necessity, but it is not a collective illusion or a shared belief system. People choose Bitcoin because it has some unique attributes that make it better as a form of money than all other currencies. Because money is a solution to intersubjective issues, the monetary system tends to converge on a single medium.
Or rather, various economic systems will emerge from a single medium due to the function of money. Bitcoin's inherent attributes are driving the market to converge on it as a tool for transmitting and measuring value, because it promotes a step-function-like boost more than any other monetary medium. As long as you fundamentally believe that currency is a necessity and that the currency system will naturally converge, then the question to be solved is focused on: Can Bitcoin better fulfill this currency function than other competitors?
Money is a necessity
We know that there can be no civilization without money. Without money, there would be no planes, no cars, no iPhones, and the ability to meet people's basic needs would be severely compromised. Without money, millions of people cannot live peacefully in a city, a state, or a country. Money is an economical product, allowing food to appear reliably on the shelves of grocery stores, allowing petrol stations to fill with oil, allowing electricity to power homes, and providing sufficient water.
It is money that makes the world work. If it weren't for the function of money, the world would not behave as most people take for granted. This is a seriously underestimated feature. This is poorly understood, as it is usually not consciously considered. In developed countries, reliable money makes perfect sense. The basic necessities provided through the coordination function of money are also considered natural.
We can take for example a local business supermarket or various needs summarized in a small shop. The number of human contributions and skills required to realize the functions of such a small store is incredible. From the coordination and cooperation of the storefront, to the packaging of individual products, to the technology provider, to the logistics system, transportation network, and payment system, it extends to each product. Then consider the input for each item on the shelf. This supermarket is only a server, and each input product has its own different supply chain. This is just one example of contemporary wonders. The inputs to deconstruct a contemporary telecommunications network, grid, or water and waste management system are equally complex. Each economic network and its participants are interdependent. Food producers rely on others to meet their energy needs, provide telecommunications services, logistics and clean water, and vice versa. Almost all economic networks are connected to each other, and they are made possible through the currency's coordination function. Everyone contributes their skills based on their own interests and preferences: today they receive money for the value they provide, and in the future they will use this money to obtain the specific value created by others.
This did not happen by accident. Some less rigorous thinkers believe that money is a collective illusion, or that its value comes from government. In fact, money is a tool invented by humans to facilitate trade and meet specific market needs.
Money facilitates these activities as an intermediary for a range of current and future transactions. There is no conscious control or instruction. When assessing the value of different commodities, market participants finally chose to use money as the most suitable expression tool for converting current value into future value. Although personal consumption preferences vary from person to person and constantly change, the need for exchange is universal and functions are uniform. For each individual, the value currently generated can be converted into consumption in the future through money. The value of people's investment in houses, cars, food, leisure and other places will naturally change over time and logically vary from person to person. But the demand for consumption and the need to communicate preferences will not change, and apply to all individuals on the basis of interaction between subjects.
The existence of money conveys these preferences and ultimately passes value. But all values are subjective (rather than built-in), and money forms the basis for expressing value and, more importantly, relative value.
Money represents a collective cognition, and everyone can benefit from this common language that conveys personal preferences. It aggregates and measures the preferences of all individuals in an economy at a particular point in time. Without a common constant that everyone agrees on, it cannot or at least cannot efficiently convey value. Think of money as this constant as a benchmark for measuring everything else. If it doesn't exist, almost everyone will stagnate and no consensus can be reached on the value of anything. By comparing with a constant, it is possible to discern the relative value of the two commodities. Billions of individuals with unique preferences produce billions of goods and services. By converging in the form of money, all preferences are aggregated and communicated, and a price system finally emerges. By using a common intermediary (money) to measure and express the value of all commodities, it is possible to understand the value of one commodity (or resource) relative to other commodities.
Without a common currency, there would be no concept of price. Without the concept of price, any range of economic calculations is impossible. With the ability to calculate economically, people can take independent action through the information transmitted by the price system, and better understand their needs by understanding the needs of others. In fact, this is a price system that shapes the supply and demand structure, and eventually becomes a necessity, because it provides information, otherwise the basic needs cannot be met.
Imagine if you do n’t have a recognizable price for what you are consuming, will you know how much you need to produce to get what you like? Then you will realize: if there is no form of price expression, you cannot understand the value of your own production, nor the value of goods and services produced by others. This has become an endless loop, and it is money that enables the basic structure of an economy to be established through a price system. Although money is often considered the source of all evil, money may also be the greatest accidental invention created by human beings, and it is not created through conscious control.
I intentionally use the word "miracle" to shock the reader and get rid of the complacency we always attribute to the mechanism. I firmly believe that if this is the result of artificial design, if people are guided by price changes and realize that the significance of their decisions is far more than just meeting their current goals, then this mechanism can be regarded as one of the greatest achievements of humankind.
But its misfortune is twofold, it is not a product of artificial design, and people guided by it are usually not clear why they should do their own work. But those who advocate "conscious direction" and those who don't believe anything can be developed without design (even we humans don't understand) should remember this: the question is exactly how Extend the scope of resource use to any area beyond the control of personal consciousness; how to eliminate the need for conscious control, and how to provide incentives to enable individuals to do what they want without anyone telling them what to do.
Economist Friedrich Hayek, The Use of Knowledge in Society
Various economic systems converge in a monetary medium
Silicon Valley's recent thinking has led many to believe that there may be hundreds or even thousands of currencies in the future. The machine will do all the calculations! Artificial intelligence and quantum computing will do it all. The more "reliable" point of view is that 95% of cryptocurrencies will most likely fail, but will leave some "interesting" items. "It's really hard to know which one will succeed." "Just like venture capital, most will fail, but the one who wins will win." At least, this is the point most people in Silicon Valley instill, because it is based on the historical experience of corporate investment. Talk. But in fact, this is a flash of words lacking basic principles, and it is also an old formula to set a completely different type of problem.
It seems reasonable to associate bitcoin with the development rhythm of technology startups to form a thinking framework, but the two are not comparable at all. It is illogical to assume that the competition between two (or more) monetary media will be somewhat similar to the model of competition between two companies. Companies participate in an arms race with capital as a weapon; for this they need money to coordinate economic activity. How to get money? The answer is to use money to coordinate the production of goods and services, and to obtain more money (profits) by selling output. In essence, companies compete for funds in the same pool to accumulate capital. Money is the tool that makes wheels work. Without money, it is simply impossible to coordinate all the necessary personal skills and produce goods and services from complex modern supply chains. None of this would be possible without a large number of people accepting a common form of currency.
With a single medium of exchange, as long as the number of people willing to use it continues to grow, the economy will continue to grow. The larger the scale of the economy, the greater the opportunity for gains from exchanges and specializations. Perhaps more importantly, the production structure can become longer and more complex.
Economist Saipedean Ammous, The Bitcoin Standard In the production supply chain, money plays a different role than any good or service. The difference is that one is the satisfaction of preferences (production of goods and services) and the other is the coordination of preferences (currency). The satisfaction of preferences depends on the coordination of preferences, and the coordination of preferences depends on the price system. Only when everything converges in a single currency medium, the price system as its derivatives will be formed. Without a price system, there would be no division of labor, at least not enough to make a complex supply chain work. This is a fundamental principle that most people most easily overlook when considering a multicurrency world. Any price system is derived from a single currency. If it were not for large-scale individuals producing a wide range of goods and services and communicating the value of those goods and services through a common intermediary, the concept of price would not have appeared at all. To play the role of money and price, convergence in a single medium is a prerequisite. To be more precise, economic systems emerge from a single currency medium, rather than converge on it. Countless individuals converge on a monetary medium, and the result is an economic system.
The value of all other goods and services is consumption, and the value of money is exchange. When you choose to convert value (the subjective output of time, labor, and physical capital) into a monetary good, what you are buying is an exchange benefit. Everyone ’s consumption preferences are unique, and money provides a unique feature for all market participants: building a bridge between the present and the future (whether it is a day, a week, a year or longer). In any exchange of current value, there is some time continuum until the next future exchange. At the point of exchange, everyone must make a choice as to which currency can save the value created today into the future. Is it A or B? Although one person can choose to hold one or more currencies, if there is only one currency, the matter will be much more efficient. One currency will save future purchasing power better than others. Everyone understands this intuitively and makes decisions based on the inherent characteristics of one currency relative to another. Although one person's preferences are influenced by others' preferences when deciding which currency to use, everyone is conducting an independent assessment to identify the comparative advantages of each currency. It is no coincidence that the market will converge on a single medium, because everyone is trying to solve the problem of future exchange, and people's preferences are interdependent.
The ultimate goal is to reach a consensus so that everyone can communicate and exchange with the widest and most relevant trading partners. Overall, this is an objective assessment of tangible goods based on inter-subject demand. The point is to find a suitable item that everyone recognizes: i) a relative constant, ii) measurable, and iii) available for exchange. The existence of a constant creates an order that did not previously exist, but the constant must also serve as both a measuring tool and a means of exchange. The combination of these characteristics is often described as a collection of scarce, persistent, interchangeable, divisible, and transferable attributes, and only money meets these attributes. Few commodities have these attributes at the same time, and each commodity is unique, and its inherent attributes make it better or worse when performing certain functions in the economy. A and B are always different, and the currency products that perfectly have the above combination of attributes are so rare that the differences between them are not insignificant.
More practically, everyone agrees to express value through a single currency commodity, because it is in the interests of both individuals and collectives. This in itself is the problem: how to communicate value with other market participants. If consensus cannot be reached, the entire operation will not progress. But it is the characteristics of the currency commodity itself that have contributed to convergence and consensus. The idea of a world of thousands of currencies completely ignores these basic principles. Only by gathering large-scale individuals on the same medium can we discover the information that is actually needed. As more and more people use a common medium as a tool to facilitate exchange, the value of that medium will increase. The root cause is that as more and more people gather on this medium, the medium will accumulate more and more information, and its effectiveness will also increase.
We can treat everyone as a potential trading partner. When people use the same universal medium as the standard of value, all existing participants in the currency network will get new trading partners, and joining the network will get the same benefits. Because there is mutual benefit, the scope of choice has also expanded.
As the currency network expands, more commodities will be valued through this common transaction medium. As more commodity prices appear, so do more relative prices. This common medium brings together more and more information, and everyone in this network (and the entire network) can rely on it to better coordinate resources and respond to changing preferences. As this universal medium conveys more information about more goods produced by more individuals, this constant becomes more valuable and inherently more reliable. As more and more variable information is conveyed through this common medium, the constant becomes more stable.
As the popularity of a currency network increases by an order of magnitude (10 times), the number of possible network connections may increase by two orders of magnitude (100 times). This not only proves the reciprocity brought by penetration, but also highlights the consequences of converting value to a smaller currency network. If the network scale is reduced by one-tenth, the number of potential connections becomes 1%. The distribution of each network is not all equal, but a larger currency network can be transformed into a more reliable constant for conveying information-higher density, more relevant information, and a wider range of options. When people think about which medium to use, the size of the currency network and the expected growth of the network in the future will become the key considerations for A / B testing among this subject. Although the number of individuals who can maintain social relationships is essentially limited, the currency network is not subject to the same restrictions. It is money that allows humans to escape the limit of Dunbar number (the upper limit on the number of people who can maintain close interpersonal relationships with one person, usually considered to be 150). A currency network allows millions (if not hundreds of millions) of people who don't know each other to contribute value to the terminals of the network, and requires fewer direct connections.
In the end, the currency network will accumulate the value of all other networks, because if there is no currency network, no other network effect will exist. Without a common currency to coordinate various economic inputs and start an active price feedback loop, a complex network cannot be formed. Any currency network needs to be based on a common currency, and only with it can other value networks be formed. It provides a common language that conveys value, and ultimately facilitates trade and specialization, and organically creates the ability to use resources beyond the scope of "conscious control" (borrowing Hayek's concept). When measuring the network effects of a social network, logistics network, telecommunications network, power grid, etc., adding them together is the value of a currency network. A currency network not only provides the basis for the formation of all other value networks, but the currency of the network is also the key to access all derivative networks within the currency network. The universal currency is equivalent to engines and oil.
Yes, currencies such as the US dollar, euro, yen, pound sterling, franc, renminbi, ruble, lira, peso coexist today, but this is not a natural consequence of an open, global economy. In fact, every fiat currency that exists today represents a certain part of gold, and the world used to converge on gold as a monetary standard.
Without strong government intervention, no fiat currency would exist; if not because gold previously existed as the (only) monetary medium, fiat currency would not have appeared. All fiat currency systems are nothing more than proof of the failure of gold as a monetary medium. Of course, modern currency theorists and gold advocates will never admit it.
The fiat currency system is nothing more than a moving zombie. The gold standard was formally abandoned in 1971, and the existence of the fiat currency system based on regional jurisdiction thereafter only represented a temporary deviation from the free market currency power. The modern fiat currency system has only been lingering for a while, because the problems caused by the fiat currency system itself still cannot be solved. Bitcoin is this solution. Since the creation of Bitcoin, people have been converging on Bitcoin as a new currency standard; this trend will continue with the natural spread of relevant knowledge.
All roads remit to Bitcoin
The biggest constant: limited scarcity
Over time, the market has gradually converged on Bitcoin, and its value has continued to rise as it provides a constant that is superior to any other form of currency. Bitcoin has an optimal monetary policy, which is reliably implemented on the basis of decentralization. The supply of Bitcoin will never exceed 21 million, and the entire system does not need a little trust element.
The Bitcoin supply cap is achieved by the network consensus mechanism on a decentralized basis. No one needs to trust anyone, but everyone is strengthening that rule independently. Bitcoin integrating these two functions is gradually becoming the scarcest form of currency ever. Limited scarcity is a feature that no other form of currency has ever achieved or will never achieve, and this scarcity fundamentally drives the demand for Bitcoin.
But scarcity has two sides. Capping supply may be the main attraction, but demand is the key to scarcity, which is often overlooked. It is actually demand that makes scarcity useful as a constant in transactions. Under the two-way effect of increasing demand and complete inelasticity of supply, Bitcoin has become increasingly scarce.
The capped scarcity creates demand, and increased demand creates greater scarcity. It sounds like an endless circle, but it's actually the same. If there are 21 million bitcoins in the world and only one person thinks they are valuable, then bitcoin will not be scarce and useless. But if 100 million people think Bitcoin is valuable, 21 million will start to look scarce. And if the scale of the network grows to 1 billion people, 21 million will become extremely scarce, and Bitcoin as a constant will be more practical.
As supply is capped, increasing demand will naturally lead to more decentralized Bitcoin holdings. There are so many Bitcoins that can be circulated. As more and more people hold coins, the cake is eventually divided into smaller and smaller shares. As more and more people recognize the value of Bitcoin, this network is not only more practical but also more secure. As more people communicate with the same value language through this more reliable constant, the network becomes more useful. As more and more people participate in the network consensus mechanism, the entire system is more resistant to corruption and more secure.
Please note that blockchain is not necessarily related to the capping of supply, and the planning of the supply of Bitcoin is not credible because of software settings. The 21 million is credible because it is based on decentralized governance and has more and more network participants. 21 million became an increasingly credible fixed number because more people participated in the consensus, and as everyone's share of the network became smaller and smaller, it eventually became a more reliable constant. As the number of users increases, so does security and usability. The following figure is the distribution and relative density of global Bitcoin users (the following is a heat map of network nodes). With the increase in the coverage and density of each market, Bitcoin's position as a constant has been increasingly consolidated.
As more and more people choose to join the Bitcoin network, the number of 21 million becomes more and more credible. In the minds of Bitcoin users, the limited scarcity is Bitcoin and all other forms of currency (traditional currency and competitive Cryptocurrency). All other currencies have either become more and more centralized over time (e.g. USD, Euro, Yen, Gold) or are too centralized from the beginning (e.g. all other cryptocurrencies) and cannot be compared with 2100 in supply 10,000 quota competition. Centralization will inevitably generate dependence on trust. Ultimately, trust puts the supply of any currency at risk, which in turn weakens demand and marginalizes its utility as a trading tool.
When all other currencies rely on trust, the constants provided by Bitcoin do not need to be trusted. The 21 million supply cap is credible because Bitcoin is decentralized, and over time, Bitcoin has become increasingly decentralized. Any other form of currency is best aligned with Bitcoin, but in reality this is not possible, because people will converge on a single medium, and Bitcoin is already preemptive. All other currencies eventually compete with a perfect constant, a constant that does not change and does not depend on trust.
Every transaction has various forms of currency competing with each other. If the primary (or sole) purpose of an asset is to exchange other goods and services, and there is no such thing as a productive asset (such as a stock or bond) with a commitment to revenue streams, then it must compete as a currency. As a result, any such asset will compete directly with Bitcoin in exactly the same use case, and no currency can provide a more reliable constant because Bitcoin already exists and supply is limited.
Because people will converge on a single medium, the scarcity of Bitcoin will always be strengthened on both the supply and demand sides, and due to the reflexivity of currency competition, all other currencies will be affected by the opposite force. The difference between the two currency commodities is not irrelevant, and the individual's decision to use this medium instead of that medium to trade is not trivial. Money is an inter-subject matter. Choosing one currency medium is an explicit rejection of another currency medium, which in turn causes one network to gain value (and utility) at the expense of another network. As Bitcoin becomes more scarce and more stable as a constant, other currencies become less scarce and more variable.
Currency competition is a zero-sum game, the relative scarcity, the dynamic relationship between supply and demand, and other factors that constitute the fundamental difference between the two currency media. This difference will only increase over time and become more and more obvious.
But remember, scarcity for scarcity is not the goal of any currency. Instead, the currency that provides the largest constant can most effectively facilitate transactions. The most scarce currency commodity can best maintain its value to deal with current and future transactions. The relative price and relative value of all other commodities are the information that people want most from the currency coordination function. In each transaction, everyone has the motivation to maximize the value of today to the future. The limited scarcity of bitcoin provides the greatest guarantee for the value of current transactions to be retained in the future. As more and more people believe that bitcoin is the relatively scarce currency commodity, its price stability will emerge as a feature.
See Bitcoin is Not Too Volatile:
Best Measurer: Severability
Although scarcity is the foundation, not all scarce goods have a monetary function. To play the function of conveying value, a currency commodity must be relatively stable, easy to measure, and capable of trading. A ruler may be an effective measurement tool, but it is not scarce and it is not easy to be divided into larger or smaller units for trading. In transactions, a scarce and measurable currency commodity can be used to measure all other commodities; a currency unit that is easy to split and easy to transfer can have practical uses in transactions.
Bitcoin has both limited scarcity and can be divided into eight digits after the decimal point (0.00000001 or one billionth of a bitcoin) and can send any amount of value. In the context of money, scarcity just for scarcity is not necessarily valuable, nor is severability. But the combination of the two is valuable, especially when each subdivided unit is interchangeable-each individual unit is essentially interchangeable, and each part is indistinguishable from the other parts . It is the combination of these characteristics that makes Bitcoin not only a perfect constant, but also an effective way to measure value and facilitate transactions.
In the code, a bitcoin is actually expressed as 100,000,000 sub-units, and the smallest unit is called satoshi (or sat for short). Technically, one Bitcoin is 100,000,000 Satoshi. The current Bitcoin transaction price is around $ 9,000, so 1 Satoshi equals about one-twentieth of one cent. Essentially anyone can exchange any amount of value into Bitcoin. Bitcoin, and any currency, has a goal to store value between a series of transactions.
Today, Bitcoin is received for a certain value of production, saved, and consumed in the future in exchange for value generated by others. Regardless of the amount, currency plays the same role. The practical result of severability is that Bitcoin is able to measure any or all of its value, thus supporting any or all of its adoption. The range of value people produce is vast, and severability allows everyone to use Bitcoin as a savings mechanism, regardless of whether the value of storage is $ 50 or $ 50,000. An effective value communication tool whose measured value range should be able to cover everyone's production, and Bitcoin can do it perfectly. Bitcoin can perform any number of divisions and transfers, and this ability makes it available to everyone and all produced goods, regardless of their amount.
In the A / B test of currency competition, if A> B, then any number of A will function better than any number of B. Over time, whether it's $ 50 or $ 50,000, A's purchasing power increases relative to B. Some coins in Coinbase appear to be "cheap" and bitcoin appears to be "expensive". Don't be fooled by these currencies that look like "more cost-effective transactions". Always remember that Bitcoin can be divided into smaller or larger units to store less or more value.
A Bitcoin is essentially a subjectively set unit, as is a unit of any currency. The market tests whether A or B is more monetary. This is an inter-subject decision. When the market communicates which network can effectively perform the currency function through price and value, network value is output, not input. The input is that everyone evaluates the properties of the currency itself relative to other currencies. If Bitcoin is A in your assessment, then there is no such thing as "too expensive". Bitcoin can be overvalued or undervalued at any time, but every additional person who adopts Bitcoin increases the value of the network (recall the discussion about trading partners + network connections).
Bitcoin can be easily divided into very small units, which allows an almost unlimited number of individuals to transform and communicate value through the network. If A is better than B and A can support unlimited adoption, then there will be no demand for network B in the end.
As people independently evaluate this A / B test, eventually more people will adopt Bitcoin, and Bitcoin will be divided into smaller and smaller units (on average). This is the result of an increase in demand and a fixed supply. As a function of this process, the value of the network actually increases with it. As more and more people recognize the value of Bitcoin, Bitcoin as a network is becoming more and more valuable. Essentially, 0.1 bitcoin = $ 1,000 is more valuable than 1.0 bitcoin = $ 1,000, although the value in both dollars is the same. The higher the total value of bitcoin, the more transactions (and ultimately more trade) become possible, but the value is actually the result of more and more people choosing to use bitcoin as a medium of transaction. The face value of Bitcoin owned by everyone is getting smaller and smaller, but the purchasing power of each equivalent unit will increase over time. In each transaction, everyone is communicating his / her own value to this network, and this is done at the cost of the direct loss of other competing networks. Through this process, a new price is given to the value created and measured by everyone. As a result, Bitcoin has accumulated more information from a wider range of trading partners.
Although today's prices for goods and services may not have been quoted in Bitcoin, a pricing system will gradually take shape whenever someone converts value to Bitcoin. Even through the US dollar as an indirect medium, the value produced by a particular individual in the world will be expressed in a unit of Bitcoin; as more and more people choose to do so, based on each individual, this value will Gradually transformed into a smaller and smaller Bitcoin unit (on average). As a result, bitcoin with smaller and smaller face value can be used by more people to pass a certain value. As more and more people use bitcoin to measure it, their ability to measure relative value will only increase. .
Because Bitcoin can measure all value and can be adopted by an unlimited number of individuals, in the long run it will eliminate the need for any other value delivery network, as the currency form with the lowest rate of change can ultimately convey a more perfect message . Limited scarcity combined with severability can create extremely powerful trading media. In addition, due to its absolute scarcity, Bitcoin has the lowest final rate of change, and it can be subdivided into fractions of a cent, and it can measure value more accurately than any other currency.
The greatest trading tool: transferability
With this bottom line, the true winning punch has become a reality, and Bitcoin can be irrevocably transferred through a communication channel without the need for any trusted third party as an intermediary. This is fundamentally different from digital payments in the fiat currency system, which rely on trusted intermediaries.
Overall, Bitcoin is a constant that is superior to any other form of currency and can be highly segmented (and measured) while being transferred via the Internet. Can you find another product that has these attributes at the same time: limited scarcity (largest constant) + separability and interchangeability (metric tool) + ability to send via a communication channel (easy transfer). This is the problem that all other currency commodities have to face in the competition for the currency convergence champion.
The only way to truly understand this rare competition is to experience it firsthand. Anyone can run a Bitcoin node on a home computer to access the Bitcoin network without permission. The ability to turn on a computer from anywhere in the world without having to license or rely on a trusted third party to transfer a limited scarce resource to anyone else is a powerful ability. Hundreds of millions of people can do this unanimously without the need for anyone to trust any other participant in the network, which is incredible and difficult to fully understand.
Bitcoin is often described as digital gold, but in fact this statement is not reasonable. Bitcoin combines the advantages of physical gold with the advantages of digital dollars, without the limitations of the latter two. Although gold is scarce, it is difficult to divide and transfer, and the dollar is easy to transfer, but it is not scarce. Bitcoin is a finite and scarce currency that is easy to divide and transfer. In the current currency system, gold and all fiat currency systems rely on trust, while Bitcoin does not need trust. Bitcoin has optimized the advantages and disadvantages of these systems, which fundamentally explains why the market will gradually (and will continue to) converge on Bitcoin to implement currency functions.
Bitcoin eliminates all other currencies
Anyone who accepts these three main conclusions: i) money is a basic necessity, ii) money is not a collective illusion, and iii) the economic system will converge on a single medium, then he / she will be more conscious of finding the most Best form of currency. It needs to be able to store future value, and ultimately allow people to turn their time and skills into a variety of choices beyond the imagination of previous generations. Ultimately, freedom is what a reliable form of money can provide: freedom to pursue personal interests (professionalism), and the value of this value in exchange for the value created by others (transactions).
Whether or not people consciously ask these questions to themselves, they will naturally be forced to use actions to give answers. They will get the same answers as conscious questioners. Conscious and subconscious people will reach the same conclusion, because the basic truth will not change, and the function of currency is single: as a medium for a series of current and future transactions, it will provide a baseline for the general population to convey subjective values, People will benefit from this transaction and specialization. Money is a necessity. There are some identifiable attributes in the trading function of a certain commodity, and the transaction is essentially an inter-subject matter.
To enter the largest and most diverse economy ever, owning Bitcoin is becoming a cost of entry. Bitcoin is global and people can access it without permission. Because Bitcoin has become the common language of all participants, participants in the network can communicate with others and eventually trade. The more trading partners, the greater the value provided by each unit of currency to each holder. Although there may always be frictions in jurisdictions that can hinder transactions, the use of the same common currency can eliminate the source of friction in value communication, and capping the supply of bitcoin will allow its pricing mechanism to accumulate and communicate better information. Compared to any other form of currency, the distortion of its information transmission is minimal. As more and more people choose to store value in Bitcoin, its supply cap becomes more credible, and its pricing mechanism is more reliable and meaningful. New users of a currency network have both contributed value and realized value due to this adoption, which is why it is never too late to enter Bitcoin, nor is it too expensive.
It doesn't matter how complicated Bitcoin is. After all, Bitcoin will become an A / B test. The demand for funds is real, and individuals in society will eventually converge on the currency form that can best realize the exchange function. No currency in the world is more scarce than Bitcoin, and scarcity will drive user growth and value transfer like gravity. Today, most billionaires don't know Bitcoin. Bitcoin is a brain burner of equal opportunity, but even those who don't understand Bitcoin will eventually rely on it.
There are many fundamental questions surrounding Bitcoin: Bitcoin's price volatility, it seems to be slow, expansion is facing challenges, it is not often used for payment, mining consumes a lot of energy, and so on. After large-scale popularization, stability will follow, and all other known limitations will be resolved. Limited scarcity, coupled with the ability to measure, divide, and transfer value, will form a value. function. This is the innovation of Bitcoin.
The supply of money A is capped. Currency B is not. The value of currency A relative to currency B is constantly increasing. The purchasing power of currency A for goods and services continues to increase, while currency B is the opposite. Which one do I want? A or B? Make the right choice, because opportunity cost is your time and value. Various reasons can simply explain why people choose A over B, but what actually works is basic common sense and survival instincts. Bitcoin will eliminate all other currencies because the economic system is converged in a single currency, and Bitcoin has the most credible monetary attributes.
I do n’t think we will have any kind of benign currency until the coinage is taken away from the government. I mean, we ca n’t take it away from the government through violence. All we can do is to use some kind of deceit. A roundabout way to introduce new things that governments can't stop. Friedrich Hayek
This article represents my personal opinion and has nothing to do with Unchained Capital and my colleagues.