Digital Currency in the Eyes of Economists: Series Preface

There are three great wishes in the scientific community that are difficult to achieve: doctors can cure all diseases, scientists can predict all earthquakes, and economists can explain all phenomena.

Economics is clearly an important social discipline. Starting from Adam Smith, after more than two hundred years of development, economics has formed a complete and mature scientific system and research method, which can make a reasonable explanation for most economic phenomena. However, economists' views are often contradictory, and economists' prediction accuracy is not high. The fundamental reason is that the human economic activities studied by economics itself are highly complex, persistently irrational, and constantly changing. Dynamic balancing. Economists' rational interpretation and successful prediction of phenomena must be based on sound theories and complete data. Both theory and data require long-term exploration and accumulation. A set of theories has been in practice for decades, so economics is a "slow fever" discipline. This can be seen from the age of Nobel Prize winners in economics. According to statistics, the Nobel Peace Prize has a 17-year-old winner. The Nobel Prize in Physics has a 25-year-old winner. However, the Nobel Prize winner in economics is 51. The winners of the Nobel Prize in Economics are over 67 years old and are among the most “aged” of all Nobel Prizes. The economist, who knows what to do, now runs into a hot hand: how to interpret the ever-changing new species, the digital currency.

Faced with the new challenges of digital currency, economists fall into two categories, one is scornful, and it is considered that the digital currency is short-lived, which is not worth mentioning in speculative bubbles; the other is cautiously accepted and begins cutting-edge exploration. The first class of economists has their reasons. The digital currency represented by Bitcoin has grown from scratch in just 10 years. Bitcoin, without any underlying assets, went from $1 to nearly $20,000 and quickly fell back to $3,000. Such a market with huge price fluctuations is indeed full of speculators, and there is also a huge bubble. However, to the disappointment of such economists, Bitcoin did not eventually return to zero. After falling to 3,000 dollars in 2018, it has recently multiplied by more than 7,000 dollars, showing its tenacious vitality. There is a unique phenomenon. The more prominent the authoritative figures in the economics and financial circles, the less optimistic about Bitcoin, which is unanimously considered to be a speculative bubble. The representative figures have familiar financial celebrities, such as Buffett, who have always been negative about Bitcoin, thinking that Bitcoin is a joke; there are also financial circles, such as Nobel Prize winner Robert Schiller, who believes that Bit The currency is a huge bubble, and it is likely to collapse completely. There are also financial regulators, such as former Federal Reserve Chairman Ben Bernanke, who said at the congressional hearing that there are serious problems with Bitcoin and will not succeed. Of course, the most influential evaluation came from JPMorgan CEO Jamie Dimon, who called Bitcoin "a scam." Mark Twain said: "It is not an unknown thing to make people panic, but a mistake that is thought to be correct but wrong." Faced with such a different kind of bitcoin, economists really felt panic. This panic comes from the fact that existing economic theories are difficult to explain the new bitcoin phenomenon, and economists are worried that the old theory is supposed to be correct but wrong. The biggest unexplained problem facing economists is that since all economic theories have identified bitcoin as a vain bubble, why is this bubble so long-lasting, so wide, and incredibly fascinating that it is so fascinating that the world There are 2 million bitcoin holders, and 20 million people participate in digital currency transactions? One of the widely circulated views is that the time to predict the bursting of the bubble is futile and can only wait for the market to return to rationality. Eric Piche, a professor at KEDGE Business School in France, is a classic. He said: "As Keynes told us, 'the market irrational time can grow to let you go bankrupt', so there is only one thing that can be done – sitting by the river, one day, the body of Bitcoin will be Drifting in front of you."

Obviously, such an interpretation is almost perfect to be irrefutable, but it shows the helplessness of the traditional paradigm for this anomaly. In other words, Professor Eric Pischer is equal to saying that we can't explain why such a vision can last for so long. We can only say that they are irrational. They can only "sit by the river, wait for time" to clean up. Bitcoin. However, Professor Eric Pecher apparently forgot, Keynes also said: "We are all dead in the long run." If the irrationality of the market is long-lasting and extensive, shouldn't we reflect on the rational assumptions in the traditional category? In the "Structure of the Scientific Revolution," Thomas Kuhn said, "The new discovery begins with the observation of vision." Only when there are enough visions, can there be a paradigm shift. A careful study of the extraordinary experience of Nobel laureate Thomas Taylor in 2017, the greatest inspiration is his perseverance of research and research on the widespread existence and irrationality of economic life, indomitable, and eventually develop the most cutting-edge, now Behavioral economics that was once devastated by traditional economics. Contrary to the first class of economists who sneered at the digital currency, the second category of economists regarded digital currency as an excellent research object. They maintain an open mind about digital currencies and explore the root causes and mechanisms of the existence of such phenomena as digital currencies. With the development of digital currency, more and more economists have joined the second camp. At the frontier journals and academic forums, papers and academic exchanges on digital currency have emerged. The purpose of the series "Digital Currency in the Eyes of Economists" is to summarize the frontier research of digital economy in the economics field, as a summary of the economic research of digital currency, and provide a useful reference for interested researchers. And draw on. The series is structured in six parts, covering the classification, market, exchange, price, risk and regulation of digital currencies.

  • Classification: Bitcoin with no place for souls
  • Market articles: there will be no leek in the currency circle
  • Exchange Part: The Glory of the King
  • Price articles: ups and downs in the bubble
  • Risk articles: the wind and the sky
  • Supervision articles: Keeping pace with the times and creating a better future

There is a little story about the origin of this series. After leaving the digital currency exchange last year, the author returned to the school to continue his Ph.D. in finance, and the research direction was set to digital currency. In terms of digital currency, due to policy-oriented reasons, domestic research is relatively rare, and articles in academic journals are mostly foreign-based, and there is no comprehensive digital currency document review in the world. My doctoral tutor, Professor of Economics at Cornell, and Ms. Hong Yongzhen, Dean of the School of Economics of Xiamen University of Asia, advised me to read a large number of papers in this topic during the topic selection of doctoral thesis, and at the same time write an English paper review. Fill in the gaps in this regard. Why not do this in one fell swoop? Looking at the literature and writing a review, how difficult is it for me to be a financial commentator? In reality, however, I have far underestimated the difficulty of completing this task. First of all, the literature on digital currency emerged in the second half of 2018, showing that more and more people are interested in the academic world. This is of course a good thing, but it has bittered me to write a review of the document, and re-open it in a month or two. Once you search, you can add dozens of new related papers. In addition, after returning to China for 6 years, the ability to write in English has deteriorated severely, often forgetting words. Fortunately, Yang, a Ph.D. student in applied economics at Cornell University, is also very interested in digital currency. With his help, under the joint guidance of Hong Yongzhen and Cornell Applied Economics Professor Turny, we spent six months writing A draft of an English version of more than 80 pages and more than 30,000 words was published. Of course, the English version is a more orthodox document review, and it is also relatively long. I then germinated the idea of ​​extracting the essence of the English version and writing a relatively refined Chinese literature review, aiming to explain the current economy in a relatively easy-to-understand language. The scholars' views on digital currency at the forefront of the theory have brought different perspectives and opinions to Chinese readers, especially those who want to do serious research. So I spent a lot of time to translate the refined Chinese series. Of course, the original English version will also be attached for your reference. This series, regardless of the Chinese version of the series, or the full version of the English version, is currently the most comprehensive literature review on digital currency, hoping to help readers.