——Answering the concepts in the article “Invite out Satoshi Nakamoto to Welcome the New World”
Modified by Zhu Weisha on September 7, 2024
These concepts are introduced and discussed in this article and other articles but are scattered in different chapters. This section summarizes the characteristics of Bitcoin to make the concepts more straightforward. These concepts will be continuously supplemented.
21. Bitcoin is not an air coin
The value of Bitcoin is converted from the value of electricity and equipment. This process is precisely the same as that of enterprise product production. Bitcoin is a commodity and an asset like gold. However, Bitcoin is a string of numbers, different from gold and not a physical asset. This is the source of Bitcoin being accused of being air. In fact, our bank deposits are also numbers, not physical assets. Are bank deposit numbers, not assets?
22. Bitcoin has experienced an air stage
In the stage when there was no transaction, from 2009 to the first transaction on May 22, 2010, Bitcoin was in the air stage. Although there was a cost, there was no price. Bitcoin conforms to the Mises price regression law.
23. Bitcoin is not a virtual currency
The term virtual currency seems to imply that Bitcoin is not real but virtual. Bitcoin is more difficult to produce than legal tender, and a group of people determines the issuance of legal tender. No one determines the issuance of Bitcoin. Legal tender is even more virtual if Bitcoin is a virtual currency. There are indeed air coins in the blockchain, but coins converted from external resources are not air coins. Air coins are a type of credit coin.
Asset, credit, and air coins are accurate, while virtual currency is inaccurate. Virtual currency implies that only legal tender is currency, and the others are not. In fact, legal tender is just a type of credit currency.
24. Bitcoin is an asset currency
Using the judgment method 22, Bitcoin is produced by electricity and equipment, a commodity, and an asset. It has most of the attributes of currency. The characteristic of asset currency is that it has value in itself, at least storage value, just like gold itself has value.
25. Bitcoin is not a credit currency
Credit coins are backed by credit, and Bitcoin does not have credit backing. Legal tender is supported by credit. The credit or power of the state backs it. A regime change in a democratic country does not affect the legal status of the country’s legal tender.
26. The difference between asset currency, credit currency, and air currency
Real assets back asset currency, while future realizable assets back credit currency. Backed by assets means that it has value, and the value is not easy to disappear. However, legal tender has no value and will disappear as the country’s credit disappears. Credit currency without realizable asset backing is air backing, which is called air currency. The realizability of realizable assets is very elastic, especially intangible assets, which have high uncertainty and poor realizability.
27. Bitcoin is not an equity currency
Bitcoin does not represent the value of the Bitcoin system, while equity currency represents the value of the project. Equity currency and stocks have the same nature, but the issuance method differs. Equity currency seems to have more uses. The discussion of equity currency is not the content of this section.
28. The three basic functions of currency
There are more than ten criteria for judging currency, which are defined from different angles. From the exchange perspective, there are three basic functions: stored value, transaction medium, and value scale. Currency evolved from barter and has no strict definition. Not all currencies have the three basic functions. Among all the definitions of currency, the value of stored value is the most basic.
29. Bitcoin and stablecoins are both asset currencies, but they are different
Stablecoins meet the three functional definitions and have the functions of stored value, transaction medium, and value scale. Bitcoin is not a value scale and does not meet the definition of a primary currency exchange.
30. Stablecoins should be backed by Bitcoin
Stablecoins are now backed by legal currency, which is a last resort. During the gold standard, stablecoins were backed by asset gold, which used gold to perform the three essential currency functions. It is reasonable for stablecoins to be supported by the Bitcoin asset currency in the future.
31. Bitcoin belongs to tokens
Tokens are a broad concept, a type of voucher, and a voucher representing a medium of exchange. Points, coupons, equity, and currency are all tokens. Since tokens are a broad concept, they should represent categories like economics or philosophy. However, tokens have not formed categories or disciplines.
32. Historical evolution of currency forms
Currency has evolved.
It was initially in the form of physical objects and eventually evolved into gold.
The form of paper money evolved from tokens to legal tender.
Digital currency is a string of numbers, the digital evolution of legal tender.
Digital currency includes centralized and decentralized forms. The form of legal currency is the centralized form. The form of gold is the decentralized form.
33. Bitcoin is a digital currency, not digital legal tender
Digital currency has a smaller scope than tokens and is more accurate than virtual currency. Digital currency is a general term including two forms. The CBDC issued by the central bank is called digital legal tender, which has the credit currency nature of legal tender. Similarly, Alipay circulates digital legal tender, the electronic form of legal tender. The difference between the two lies in the different functional definitions. The central bank’s CBDC has more functions, including the electronic form of legal tender. Digital legal tender is a digital currency.
Digital currency, like currency, is a descriptive definition with a broad meaning. Bitcoin is a digital currency, not a digital legal tender.
34. Bitcoin is the digital currency with the lowest risk in blockchain
Compared with other cryptocurrencies, Bitcoin has a much smaller increase but also much less risk. Digital currencies representing equity are not supported by computing power, depending on the value of the project, and have the risk of returning to zero, just like the penny stocks seen in the Hong Kong stock market.
35. Bitcoin has a monopoly position among similar digital currencies in blockchain
Bitcoin is issued using the POW proof-of-work method. Several other companies issue currencies using the POW method, but all contribute less than 5% of Bitcoin’s market value. Bitcoin has market exclusivity, that is, a monopoly position.
36. The term digital gold underestimates the value of Bitcoin
The term digital gold compares Bitcoin with gold. Gold has withdrawn from currency circulation. Satoshi Nakamoto called Bitcoin a “coin” in the hope that Bitcoin would have the circulation value of the currency. The term digital gold does not fully include Satoshi Nakamoto’s original intention. It underestimates the value of Bitcoin.
37. Bitcoin improves the shortcomings of gold
Bitcoin’s design is modeled after gold. In addition to the same storage value as gold, it also increases the value of the transaction medium. Like gold, it is not a price scale. Therefore, we need to give Bitcoin a scale to realize the Bitcoin standard. Gold is not a digital currency, but Bitcoin is a digital currency. Under the Internet, the conditions for realizing the gold standard again using gold are far less realistic than the Bitcoin standard. Under the conditions of the Bitcoin standard, Bitcoin ultimately realizes the functions of value storage, transaction medium, and value scale.
38. Bitcoin is a cross-sovereign currency
Bitcoin, like gold, is a cross-sovereign currency. It has better liquidity than gold and functions as a transaction medium that gold does not. Fiat currency has sovereign restrictions. Only a few fiat currencies have a partial cross-sovereign nature.
39. Bitcoin standard is the king status that Bitcoin deserves
Bitcoin standard is the largest application of Bitcoin’s stored value and the most extensive application of Bitcoin, exceeding all blockchain applications combined. It is the king.
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