, Author: James Surowiecki, Translator: Huohuojiang, reprinted with authorization by Odaily.
On May 22, 2010, a Bitcoin developer named Laszlo Hanyecz (Laszlo Hanyecz) bought what may be the most expensive meal in human history. He spent 10,000 Bitcoins to please Man helped himself to two pizzas from Papa John's (Papa John's). Judging from the current situation where 1 bitcoin is worth more than 30,000 US dollars, the price of these two pizzas now appears to be as high as 300 million US dollars.Of course, no one will use bitcoins to buy ordinary things like pizza so recklessly now, otherwise I don’t know how much money I will lose in the future. In the years since Hanyates squandered so much Bitcoin, it has catapulted from an intriguing decentralized finance experiment to the best-performing asset of the decade. Since 2010, the price of Bitcoin has increased by more than 1,000,000%, and it has exploded by 220% in the last year alone. All financial websites will spend a lot of time introducing the bitcoin market. Legendary investors such as Paul Tudor-Jones, Stanley Druckenmiller and Bill Miller are also very bullish on Bitcoin's development prospects, Square Companies such as Microsoft and MicroStrategy have also poured corporate money into Bitcoin. Despite its extreme risk and volatility (it fell 25% between Friday and Monday afternoon alone), it has become, in a sense, the undisputed leader in the financial club. It is an integral part of the world and is now viewed by many as a potential competitor to assets such as gold. But at the same time, I discovered a strange thing: Bitcoin has completely lost its original purpose.After all, Bitcoin was not originally designed as a speculative asset. It was designed to be a currency, a new medium of exchange that people can and will use for day-to-day transactions (that's why we call it a cryptocurrency). When Bitcoin first appeared in a 2008 white paper, its mysterious creator (self-proclaimed Satoshi Nakamoto), described it as "a purely peer-to-peer electronic cash that facilitates online payments from one party directly to the other. sent to the other party without going through any financial institution in between." He refers to Bitcoin as "an electronic payment system based on cryptographic proof (rather than trust) that allows direct transactions between any willing two parties without trusting a third party (such as a bank or credit card company)". And that's exactly what Hanyates was doing that day in 2010: making a payment directly from one's own account to another's, without any third-party involvement. Perhaps, he did make a very bad investment decision without foresight, but it is undeniable that the way he uses Bitcoin is completely in line with its original design.Although it seems to be forgotten by now, in the beginning, Bitcoin was originally intended to be a new type of currency. With its unique untraceability, people can conduct commerce cheaply and anonymously. Thus, it can challenge the so-called hegemony of fiat currencies, such as the US dollar (issued by the government). At the same time, since the number of bitcoins is designed to be fixed (as of 2140, there will be a total of 21 million bitcoins, and the number will not increase), people do not have to worry about inflation causing their depreciation when using them. This cyberpunk fantasy fascinates many people. As recently as 2018, Twitter CEO and Square founder Jack Dorsey said: "The world will eventually achieve a single currency, and I personally think that burden will fall on Bitcoin." Even today, we can still see that many experts are hyping the revolutionary possibility of Bitcoin, and use examples such as "PayPal plans to assist its merchants in cryptocurrencies to trade in 2021" as evidence that changes are taking place.The more people hoard bitcoin and view it as a speculative asset, the less attractive it will be as a currency.The reality, however, is that Bitcoin has never really functioned as a currency. Since the beginning, only a small percentage of bitcoin transactions have been for actual goods and services—and within that small percentage, many are illegal, such as drugs and online gambling businesses. Most bitcoin transactions are mere transactions: people simply buy or sell bitcoins. For example, blockchain analytics firm Chainalysis found that in the first four months of 2019, only 1.3 percent of transactions involved specific merchants. And this trend will only intensify as the value of Bitcoin soars. But it’s worth noting that despite the speculative fervor surrounding bitcoin, its transaction volume has only risen slightly over the past two years. The total volume of Bitcoin transactions is almost nothing compared to the total volume of electronic banking and credit card transactions. An average of about 325,000 bitcoin transactions are now made per day, compared to about 1 billion credit card transactions per day.Bitcoin's failure to live up to its original purpose as a currency has to do with how it actually works, most notably because of its design that processes transactions very slowly. For example, Visa can process about 6,000 transactions a second, and has additional capacity to process transactions many times that. But Bitcoin can only handle seven transactions. As a result, bitcoin transactions often take a long time to complete, which can be a bit of a stretch if you want to use bitcoin at your local convenience store, or even to buy things online. Additionally, Bitcoin transaction fees have also been surprisingly high at various times. During the last bitcoin boom, in 2017, fees were as high as $55 per transaction, and while fees have dropped significantly since then, the cost of buying something with bitcoin topped $6 as recently as last May. That's probably fine if you're investing, but not if you just want to buy a pizza.However, the more fundamental problem with Bitcoin as a currency is that its supply is controlled and limited. Since the supply is finite, when the demand for Bitcoin rises (for example, people want to buy Bitcoin to get rich quickly), the value of Bitcoin also rises. Therefore, if you believe that your Bitcoin will become more and more popular and valuable, it is very foolish to spend it on pizza; you should store it and return it when the price rises. sell. And if you can get along just fine without spending Bitcoin, there's even less reason to spend it. In this way, the more people hoard Bitcoin and view it as a speculative asset, the less attractive Bitcoin will be as a currency.Add to this the unusual volatility of bitcoin's price -- which can plummet 10% to 20% overnight, as we've seen in the past week -- leading to a reluctance for both businesses and individuals to use bitcoin. In exchange for real goods and services, after all, no one is willing to buy something that loses 10% in value the next day (of course, it may also increase in value by 10%. But most companies are not willing to participate in this kind of gamble).Like gold, bitcoin is only as valuable as people think it is: you buy it because you think someone will pay more for it in the future.In other words, Bitcoin’s transition from currency to speculative asset was built into its own system from the start. This is also the direction in which Bitcoin has always been developing. (After Bitcoin, there have been other cryptocurrencies that have been designed to function better as money, but sadly they are nowhere near as popular as Bitcoin). Although Bitcoin was originally designed to be a payment system and medium of exchange, its real appeal, inevitably, will be as what economists call a "store of value," a digital currency akin to gold. simulants. Like gold, bitcoin is only as valuable as people think it is: you buy it because you think someone will pay more for it in the future. Like gold, its value is not offset by central bank inflation.The fact that Bitcoin itself has no intrinsic value (like a stock or a bond) doesn't mean it's doomed, it just means that Bitcoin may have lost its original purpose. What was once conceived as a way to revolutionize everyday financial life is now a way for people to get rich (or lose) overnight; ideally, they can also use Bitcoin to protect their wealth Not affected by inflation.
