Breaking News

What is bitcoin?

In Japan, the law states that bitcoin is a legal tender available from April 1, 2017 for payment and transaction. Japan has become the largest bitcoin exchange in the world and its volume currently accounts for about 50% of the global market. In December last year, the global bitcoin transactions, 1/3 of the transaction volume is denominated in yen. Japan's position in the bitcoin market benefits both from its legal status on the one hand and from the unusual business model within Japan that does not charge for transaction costs. Obviously, this is in stark contrast to the announcement made by our government on September 4 last year for the closure of the domestic bitcoin exchange. Other countries' government policies on bitcoin are also varied, with the majority rejecting it. In December last year, the Chicago Board Options Exchange and the Chicago Mercantile Exchange successively launched bitcoin options. Behind the United States government and regulatory agencies also have permission. This means that the United States is not only legalizing bitcoin futures, but also to a large extent legalizing the bitcoin itself. And the concern of the U.S. government is that Bitcoin is not being used for illegal transactions.

It is reported that Japan's Tokyo Financial Exchange is planning to launch bitcoin futures. Behind the initiatives of the United States and Japan and the bitcoin against the industry are there any dominant motivations? Of course, motivation can not be seen, we can only make some speculation.

It seems that the United States and Japan both government and industry are intent on competing for the future dominance of digital currency. This is not a "conspiracy theory" that we often criticize. This is "posthumous theory." The choice of Bitcoin's policy needs to be a national strategic choice for the big powers and need not be commended or derogatory. Some large countries, including China, some legalize bitcoin, and some prohibit bitcoin transactions are in the scope of their sovereignty. However, because bitcoin is a non-sovereign currency, sovereign states can not eliminate it. Some countries regard the acceptance or prohibition of bitcoin as a strategy for major powers. Some countries may not consider such choices as part of a major power strategy. This distinction of choice may result in "the slightest difference and the loss of a thousand miles." It now appears that the race between major powers over the dominance of digital currencies is fierce, and it is not yet clear which country will ultimately be the right choice and which country will eventually win. However, the United States and Japan now have the upper hand, which is affirmative. And in the longer term, the coexistence of digital currency and the existing legal tender has largely been agreed upon. In the longer term, human beings eventually move towards a cashless society and into the age of digital money, which is also a reasonable imagination.

The Japanese government finds that Bitcoin is the legal payment medium, which is actually very interesting. Bitcoin is a type of digital currency that is decentralized, encrypted, and anonymous based on peer-to-peer networks. A large number of calculations need to be made based on specific algorithms, also called "virtual mining", similar to the excavation of gold. According to its founder Zhongcong algorithm design, the total amount of bitcoin is determined, a total of 21 million, so digging less. Bitcoin is generated through a large number of "virtual mining" of the Internet on the basis of specific algorithms, and its distribution does not depend on a particular agency. This determines that the mechanism is different from most currencies, and the issuance of most currencies depends on specific institutions. Bitcoin relies on a decentralized "bookkeeping system" where you pass your own bitcoin to someone else and your account books record all the past transactions as well as the most up-to-date transactions, especially including your original Bitcoin area Block address and other appropriate information, as well as the block address of the new owner and other appropriate information. The books are stored in decentralized, decentralized ways on all nodes of the Bitcoin network, and are anonymous, that is, there is no record of the names of new and old owners. This encrypted program also ensures the security of all aspects of the currency circulation. No one can manipulate it, no government can control it. The limited amount of bitcoin, online "mining" reward, encourage you to go after mining, and participate in the maintenance of the entire network.

We now look at the nature of bitcoin. See if it really belongs to currency. The only basic function of money is to act as a general exchange medium. Other functions are derived from this function, for example, other functions relate to the means of payment, the measure of value, the means of value storage, and even the act of world currency in general textbooks. Of course, no currency can serve as an ideal measure of value. As Mises said, all kinds of currencies are actually changing, the economy is changing, and everyone's subjective evaluation of the currency and economy is changing. Under such circumstances, Mises, the Austrian economist, believes that currency can not serve as a yardstick of value. He said so strictly.

First, we need to ask, is Bitcoin a precious metal? Yes, it belongs to "virtual gold." The principle it dug out is the same as the gold rush in the real world. It is a virtual mining and gold is an entity mining. Is it a commodity currency? This is not because it has the use value of a good but because of its enormous exchange value as a "virtual gold."

Is bitcoin a general exchange medium? To a large extent. Bitcoin is a limited number, but was accepted by more than 100,000 merchants as a vehicle of exchange and payment in 2015. Its widespread use as a medium of exchange is already high. And in some places (such as avoiding foreign exchange controls and restrictions on capital flows), it is the best medium of exchange and payment. If governments are not pressured, their universal use will be even higher. So it should be considered a currency.

Is bitcoin a means of payment? Yes, it is used as a payment tool for so many businesses.

Is bitcoin a measure of value? Yes, even if its price quotes on the secondary market fluctuate so much that everyone can still measure the value of other currencies or commodities, other digital currencies have used bitcoin as the currency standard.

Is bitcoin a means of value storage? Yes, it has the exchange value, it is worth using it to store in exchange for the value of other currencies or commodities.

Is bitcoin the world currency? Also, its users are all over the world. In some groups, bitcoin is one of the most sought after world currencies.

Bitcoin or what? First, some market participants will say that it is a "free" and sovereign currency. In fact, no country has jurisdiction over it. Bitcoin makes the issue of currency back to the market. Second, it is a currency that preserves and adds value. In fact, our demand for money is, above all, hedging, and value-adding is often extravagant. But bitcoin actually make people realize this luxury. Third, it is still a solid currency. This is reflected in its production mechanism and primary market super-stable. We want to distinguish bitcoin's primary and secondary markets. A super-stable primary market, the secondary market volatility in the high parity, in fact, is still reflected as robust. Bitcoin secondary market volatility. At the beginning of 2017, a domestic bitcoin price is less than 7,000 yuan. December 16, 2017, the United States bitcoin parity station 20,000 US dollars mark, December 22 fell to a low of about 13,000 US dollars. On December 28, the lowest bitcoin quote for a major US trading platform was $ 14,000. In addition to the secondary market in addition to spot trading, there are Chicago Board Options Exchange and the Chicago Board of Futures, the two bitcoin futures transactions. In the secondary market, there are also some trading places with automatic quantitative trading procedures, buying and selling, keeping the market hot and pushing Bitcoin market upward. Of course, this is unfair competition. However, as long as this matter is known to all, this factor is digested by the market and is already reflected in the new bitcoin price, which generally indicates that one wishes to buy and one wishes to sell. Fourth, Bitcoin has broken the monopoly of currencies by central banks in various countries and embodied and implemented the concept of promoting currency competition and free banking in Hayek. Fifth, Bitcoin can be used to circumvent the strict control of capital flows in some countries. In the end, many similar digital currencies appear in reference to or borrowed from the thought and technical mechanism behind Bitcoin, and have generated many new digital currencies such as Ether and Litecoin, And the development direction of the free banking system.

Of course, someone will also take bitcoins for money laundering. But this is like a cup, I can take it for a drink, I can also take it to poison people, but this cup is a cup, it can not be responsible for how people use it. Can not blame bitcoin for money laundering. The ones who punish are the money launderers themselves.

Further, if a country's government accepts bitcoin as its currency, it will help it to cooperate more with the industry, and in particular, monitor the exchange of bitcoin and domestic currency. For our country, for example, we can open and standardize the channel of its trade with overseas countries by rebuilding the domestic bitcoin exchange market. This may well be a realistic choice. This is actually similar to what the U.S. government is doing. Both China and the United States are leading Internet finance companies. The fact that China has given up some degree of dominance over Bitcoin transactions is in fact equivalent to giving up its hard-won Internet financial leadership. This give up is indeed a pity. We need to think hard about whether there is some sort of "third way" or "middle way" between laissez faire and total ban on Bitcoin transactions.