Zhu Weisha November 18, 2024

 

Bitcoin's second-half gameplay has changed

The spot Bitcoin ETF was approved in January 2024. Bitcoin has been rising all the way, various predictions have emerged in an endless stream, and the market is optimistic. Arthur Hayes, a celebrity in cryptocurrency, published an article that was strongly dissatisfied with the fund's entry, saying that Bitcoin is dead. The Bitcoin in their hearts is dead. He saw the risks.

All the game rules have changed after the entry of Bitcoin's big capital. In the article "The Natural Growth Curve of Bitcoin," I said that the fourth cycle is the turning point, and Bitcoin has begun transitioning from the first to the second half. The spot ETF is the event that promotes the turning point. The goal of the first half is currency issuance, and the second half is application. The second half is manifested as a financial revolution, which is not what the technical experts in the first half are good at. Excellent financial and application product experts and politicians have come on stage. Of course, the risks have also changed.

 

Satoshi Nakamoto's 1.14 million bitcoins and other issues in the first half are no longer the main risks

In the first half, there was a view that Satoshi Nakamoto could not come out; otherwise, 1.14 million bitcoins would be thrown into the market, and the market would not be able to catch them. "In the first quarter of 2024, nearly 1,015 institutions held about $11.72 billion in Bitcoin spot ETFs. This accounts for about 23.2% of the total market of US BTC ETFs (including GBTC)". The first quarter transaction of 50.9 billion equals a turnover of about 1 million bitcoins. By the end of April, the fund had a pure turnover of more than 1 million bitcoins. The bitcoins in Satoshi Nakamoto's hands can be changed once in 4 months. The total value of global stocks and bonds is more than 255 trillion US dollars. The participation of mainstream funds and the ability to undertake Satoshi Nakamoto's bitcoins differ entirely from the first half.

In the first half, Satoshi Nakamoto had legal risks, and Trump promised to exempt Bitcoin from tax and was elected. President Trump is a person who does what he says, and Satoshi Nakamoto's legal risks can be considered to have been resolved. President Trump said humorously that he wanted to protect geniuses like Musk. It also applies to the equally great Satoshi Nakamoto.

In the first half, Satoshi Nakamoto was portrayed as a god. It was believed that if he appeared as a human, he would make mistakes and affect the value of Bitcoin. The issuance of Bitcoin has ended, the system is mature and stable, and the community mechanism has been running for 12 years. The core idea of the Bitcoin system is to remain unchanged. There is little room for Satoshi Nakamoto to play a technical role. Minor modifications are allowed, but the direction cannot be changed. Satoshi Nakamoto's role is far from solving technical problems.

If it is a religion, there is a set of doctrines, and it makes sense to become a god. Bitcoin did not have a set of Bitcoin doctrines when Satoshi Nakamoto left, which caused later generations to compete for explanations of Bitcoin, all of which were blind men touching an elephant. Decentralized, blockchain is understood from a technical perspective, and few articles truly understand Bitcoin from a financial perspective. To put it bluntly, few people have explained the financial meaning of "Bitcoin: a peer-to-peer cash system."

It was suitable for Satoshi Nakamoto not to come out in the first half. In a small circle, everyone knows who Satoshi Nakamoto is, and many people, such as Nick Szabo, Hal Finney, Adam Back, etc., selflessly protect him and the Bitcoin system. Many believers have established the Satoshi Nakamoto Protection Organization, and altruistic programmers have maintained the stability of the Bitcoin system. Bitcoin has fortunately come to this day and has been favored by big capital thanks to the selfless dedication of the core participants. We should also thank God that Satoshi Nakamoto and elites and cryptocurrency appeared when the legal currency was in trouble. Encryption is technology, the currency is finance, and the combination of technology and finance is much more accurate than decentralization and blockchain, representing the Internet financial revolution.

The second half is the financial revolution, a change in production relations. In subsequent articles, I will introduce Satoshi Nakamoto's definition of the Internet. Using the current top-level view in the Bitcoin circle, Bitcoin fundamentalism, we can only conclude that Bitcoin is dead. Will Bitcoin die? Satoshi Nakamoto's departure has created a community decision-making mechanism. Human beings will continue to thrive, and Bitcoin will be reborn!

There are three new risks in the second half.

 

The three major risks of Bitcoin

1. The risk of Bitcoin mining concentration. Figure 1 The red line represents computing power, and the yellow line represents the price of Bitcoin. On October 28, 2024, the maximum computing power of the entire network was 724EH/S.

The entry of large funds has changed the shape of the computing power curve. When Bitcoin continues to hover around the cost price, the miners' profits cannot be invested in reproduction, and the computing power will be concentrated in the hands of large capital. If the computing power of Bitcoin is controlled, its value may be significantly reduced.

          

Figure 1 Trends in Bitcoin prices and computing power

With the election of President Trump, the price of Bitcoin has risen, which will ease the time for the arrival of a monopoly, but the trend remains unchanged. Concerns about the monopoly of large funds should be one of the risks seen by Arthur Hayes. The monopoly of computing power is a phenomenon that Satoshi Nakamoto did not foresee in his early years. This monopoly needs checks and balances. When the checks and balances between computing power are insufficient to restrict monopoly, an external check and balance mechanism is required. Of course, according to Satoshi Nakamoto's point of view, why do evil when you can make money well? This is just an uncertain factor. Uncertain factors must be prepared in advance to deal with them.

2. The risk of a reduction in Bitcoin maintenance personnel. It took less than 15 years for the Bitcoin Core, which holds more than 98% of the mining software market share, to reduce from 17 to 4 people. It is very likely to be reduced to one person. What will happen if there is one person? It is the programmer's monopoly.

There are two triggers for Bitcoin's systematic risks: "keep part of limited free relay as a switch" and "safe mode may still be triggered by appearance of longer (larger total PoW)

invalid blocks" – Satoshi Nakamoto.

What are the triggering conditions? I am not a programmer, and I don't understand. If there is one person in control, and this person is not Satoshi Nakamoto, what if a competitor buys him? Once possible unfair competition is involved, the prospects are unimaginable.

3. Bitcoin user holders have no rights to the Bitcoin system. 

Entering the second half, the main force of currency holders is users. Still, they have no say in the Bitcoin accounting system. The stock market rules belong to traditional finance, and there will be no such absurd things. 

The Internet financial revolution needs Satoshi Nakamoto to play a role again"Bitcoin: Peer-to-Peer Cash System", translated into financial terms, is a peer-to-peer M0 system. M0 represents cash in the financial field. From a financial perspective, Bitcoin is equivalent to the central bank's M1. The central bank's currency is called base currency. There is no concept of base currency in the Bitcoin system; it is bubble-free when on the chain. There is no situation where commercial bank credit amplifies currency to create bubbles.

In the first release of Bitcoin, Satoshi Nakamoto stated that his goal was to create a bubble-free financial system. For this, please refer to my article "Postscript: The New World Needs a Financial ruler with Unchanged Scales"Satoshi Nakamoto launched Bitcoin, and the Internet is no longer a financial tool but a financial system transformation. It is explained in another article. If the centralized Internet is 1.0, then Satoshi Nakamoto's Internet is 2.0. The outstanding feature is community decision-making. The community is an organizational form suitable for the Internet 2.0 era. Its feature solves the problem of users being both consumers and project value contributors.The current Bitcoin community was proposed by Amir Taaki in BIP 0001 in 2011 and expanded by Luke Dash Jr. in BIP 0002. It mainly solves the program improvement problem left by Satoshi Nakamoto. The community is formed naturally. Through the practice of many people in the cryptocurrency industry, they have accumulated rich experience and formed the prototype of the governance structure in the Internet era. The disadvantage of the Bitcoin community is that there is no user participation, and the community is incomplete. It is not enough to have a complete community to solve the above three risks; it is also necessary to have a foundation. Like Ethereum, a part of the transaction fee should be collected. This time, the US Bitcoin Political Action Committee showed great power in its campaign, campaigning for 54 people, and 40 were elected. With 40 million advertisements, a seat was reversed. More than 270 US congressmen who were friendly to Bitcoin were elected in the election. Of course, without money, it will not work, and your voice will not be heard. Musk performed outstandingly in this US election, but unfortunately, there is no such representative figure in cryptocurrency to speak for cryptocurrency. Only Satoshi Nakamoto has this status.As the organizational form of the foundation, programmers, computing power parties and users each form a community. Each community elects representatives, and the foundation decision-making committee is composed of 9 people. The decision-making committee is a permanent institution, like the board of directors. Each community implements the resolutions. The committee has a very small office, which should be smaller than the Ethereum Foundation. With two votes from programmers, two from computing power parties, four from users, and one from Satoshi Nakamoto. The community controls the Bitcoin system, the maintenance personnel have income, the number of personnel will no longer decrease, and a monopoly cannot be formed, ensuring the long-term stability of Bitcoin. Satoshi Nakamoto has significantly influenced all three aspects, and there is none other than Satoshi Nakamoto, the first chairman.This idea is not to the liking of Arthur Hayes and others because there is a center. Bitcoin is a system that must be orderly to fight against entropy increase. Bitcoin is like gold, but it is not gold. Gold does not have a system and can be ownerless. But because it is ownerless, the British government at that time overthrew it at will. Only by combining the power of all parties and having its own power can there be long-term stability. Bitcoin as a system is an organism that requires a governance structure. Community governance is the organizational form of the Internet era.A leader is needed to overthrow the unfair legal currency system and realize a fair new world. If Washington did not provide leadership, would there be a United States?I also call on the Trump administration to invite Satoshi Nakamoto as an economic advisor to help develop artificial intelligence and cryptocurrency.As for who Satoshi Nakamoto is, my series of articles, "Invite Satoshi Nakamoto to Welcome the New World" are logical reasoning, which makes them very clear.

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