Today, BTC tried to hit 64k, once stood on it, and was shot down again. Mt.Gox's compensation is about to start. The market is still uneasy about the potential selling pressure. Jiaolian has written many internal references about Mt.Gox in the past six months, and has also made some quantitative calculations. The estimated selling volume at that time was about 50,000, which is actually similar to the amount that the German government cleared not long ago.

As mentioned yesterday, long-term holder selling appears to be ending, which is certainly a very favorable factor for the market to move higher.

A foreign person named Justin Bons posted a long post a few days ago with sensational views, which caused quite a stir and concern. People from all walks of life came on stage and took the opportunity to criticize BTC. In fact, if you look at Bons' long post, you will know that he is promoting the not-so-new argument that BTC will soon become unsafe, or he is just trying to get his last few "private opinions" in:

First, he believes that BTC cannot maintain the 21 million upper limit in the end, but should introduce eternal inflation to ensure continuous over-issuance of BTC to pay miners. (An economic model similar to PoS?)

Second, he advocated that BTC should adopt large block expansion like BCH to increase throughput, return to the original intention of BTC as a payment tool (Hey, why does it sound so familiar? BSV), and package more transactions to pay miners.

Third, he criticized the current BTC client market share of over 98%, which is a monopoly position. More diverse clients should be developed and popularized to avoid the power to modify core rules being monopolized by the Bitcoin Core development team.

Even if you cannot judge whether his argument that the BTC security model is about to fail and collapse is correct, when you see that he is using the "doomsday prophecy" of BTC's failure to return to zero to "smuggle private goods" and promote his three "salvation ideas" mentioned above, you should be able to smell some sinister intentions.

His remarks are essentially in line with the "death spiral theory", and there is nothing new in essence: BTC production is halved, resulting in a sharp drop in miners' income; miners' income decreases, and they are forced to shut down mining machines; miners shut down, computing power decreases; computing power decreases, security decreases; security decreases, BTC value falls; value falls, prices collapse; price collapses, miners' income further decreases... So miners further shut down more mining machines and computing power... This is a death spiral that slides all the way to zero.

Of course, compared to the classic death spiral theory, Bons’s “security collapse theory” has made a little “innovation”: he denied the role of hash power in the death spiral, and instead said that the level of hash power is not important, what is important is the income of miners, and he is talking about the miners’ income in US dollars. —— We know this because he quoted this chart:

He used this chart to illustrate that miners’ dollar income has decreased, so BTC has become less secure. He further predicted that in the next 4-12 years, BTC’s security will completely collapse and BTC will return to zero.

But why did he make such an innovation? He said that the cost of attacking BTC is the determining factor of BTC security, not the hash rate. He said that with the advancement of technology, the hash rate can be increased without increasing the cost, but the security of BTC has not increased synchronously.

However, if you think about it carefully, isn’t it because BTC computing power continues to hit new historical highs that the classic death spiral theory has been unable to fulfill its predictions, so that this argument is about to go bankrupt in people’s minds?

In this situation, Bons stepped forward and proposed a revised theory of the death spiral theory - the security collapse theory, trying to avoid the fact that BTC computing power continues to grow to prove that BTC has or is about to fall into a security death spiral, and because it is difficult to implement the three salvation suggestions he gave, it will eventually return to zero in full view of the public.

However, although he tried to consolidate his theory that the security of BTC is not linked to hash power but to miners' income by criticizing Michael Saylor, the boss of MicroStrategy, a large coin hoarder, for not understanding the security of PoW, he was still making a circular argument.

The logical loophole is too obvious: even if miners only spend a very low cost to run a huge hash power, as long as it is difficult for other systems outside the BTC system to obtain a hash power that matches it, it is difficult to attack the BTC system. This is the iron wall forged by the relative advantage of hash power.

The absolute value of hash power, or the absolute value of the cost of producing hash power, is not important. What is important is the comparative advantage of the efficiency of the BTC system in producing hash power relative to the efficiency of other systems in producing hash power. What is important is the production relationship, not the productivity.

In the comparative advantage of this production relationship, what is compared is of course the hash power (hash rate), not the production cost, let alone the miner's income.

Being able to use lower production costs to produce products with greater competitive advantages, namely hash power, is of course better rather than worse. It's like saying that it costs others 50,000 yuan to make a car, but you only need 10,000 yuan to make a car of the same level. This is obviously an advantage rather than a disadvantage. This is an extremely simple economic common sense, but he mystified it and then turned it upside down.

If miners can produce the same or even higher hash power at a lower cost due to improved production processes (technology), then miners can demand lower income for this. Just like the analogy above, if someone builds a car at a cost of 50,000 yuan and sells it for 200,000 yuan, you only need to sell it for 50,000 yuan if you build it at 10,000 yuan. Obviously, you will gain a greater market competitiveness advantage.

Therefore, BTC miners require lower income and provide higher hash power, which is essentially similar to the example of cars, selling the same or even better goods at a lower price. This of course greatly improves BTC's market competitiveness, rather than making BTC worse.

If technology continues to advance and productivity continues to increase, miners can ask the market to pay lower security fees and provide higher security, just like better bodyguards cost less. This will only make BTC better, and only fewer blocks will be issued and less transaction fees will be paid to meet the income requirements of miners.

In essence, block issuance is a cost shared by all BTC investors, and transaction fees are the total fees paid by all BTC users. These two items together constitute the total income of BTC miners. The total income of miners determines the cost ceiling for miners to continue operating in the long term.

Fewer fees and higher security. This is the bright future of BTC.