Why I am optimistic about Bitcoin - written after the first Black Friday

by xiaolai on 2011/06/11 · 25

Yesterday, Friday, after a round of rapid growth, bitcoin suddenly turned around and plummeted, falling 30% in one day (Mt. Gox) - followers exclaimed: "Black Friday is here!" In fact, this is a good thing, it only shows that bitcoin is a normal thing.

The development of technology has always been "directionless", and each direction is actually full of inevitable surprises.

When programmer Bram Cohem released the p2p-based bittorrent protocol 10 years ago (2001), it was impossible to imagine that this thing would be used in the financial field in this way? In fact, before that, no one around him could imagine that Bram Cohem, who was only 26 years old at the time, was a person who could suddenly change the Internet - but now, more than half of the Internet traffic is based on bittorrent...

Ten years after the emergence of the bittorrent protocol, a great application was born: Bitcoin, but what is about to change is not just the Internet, but the largest market on the planet - the financial market.

1. How can there be credit without government and bank guarantees?

The credit of the state and the bank is actually the least secure. Contrary to what it seems, the state and the bank are the least trustworthy institutions. When they are taking advantage, they have credit (but credit is not needed at this time), and when they are at a disadvantage, they have the greatest power to shirk responsibility (there is no credit available at this time). There is no need to say more about this, history has proved this fact countless times.

We knew this before but still had to rely on them, just because we had to - so we called them "necessary evils". I personally always believe that the greatest significance of technology is to allow humans to gradually get rid of those "necessary evils" that they could not get rid of before - although the solution of problems is often accompanied by the emergence of new problems.

The advantage of p2p is that although one person can cheat a machine, he cannot cheat the entire network. Therefore, the p2p mechanism is the best guarantee, at least, it is a more reliable guarantee than the country or the bank.

2. Without gold backing, where does Bitcoin get its value?

In fact, it is never gold that supports the value of currency - it should actually be the size of the economy. Imagine that you are on an island country, you have countless gold, but you are the only resident, and no one else provides you with any goods and services... Then is the currency you print based on the value of your gold useful?

This is a very simple truth, which can be drawn with a normal brain without any "professional knowledge". However, such a simple truth is not accepted by many scholars. The funny thing is that there is only one way to defeat scholars, which is to wait for them to die... (Note that you can only "wait", and cannot use any other means!)

The bitcoin economy is now worth $200 million (it was $60 million just a week ago). This economy currently consists of only two simple components:

Some people sell their goods and services and accept BTC as payment;

Some people recognize bitcoin and exchange other currencies for BTC.

It is foreseeable that more and more people will identify with Bitcoin, and its economic scale will only continue to grow. As long as its economic scale continues to grow, I have no reason not to be optimistic about it.

3. Are there major policy risks?

Of course there is. However, I personally think that there is nothing to worry about. Because there is no effective way to prohibit people from owning a computer file, right? Napster website can be shut down, but, 10 years later, has the bittorrent protocol been banned? Not only no one has a way to ban it, but the number of people using the bittorrent protocol (many people don't even know they are using it, such as most users of Xunlei) can only increase.