Zhang Xiangning on Blockchain: Is Bitcoin "Digital Gold"

Source: People's Daily - People's Venture Capital

The picture shows Zhang Xiangning

Before we start our discussion of Bitcoin, I would like to state that the emergence of Bitcoin proves the vitality of blockchain technology. However, Bitcoin is by no means the whole of blockchain, it is only the first interesting application of blockchain, and it is a primary application. Attitudes towards Bitcoin (especially the attitude towards the rise and fall of the price of Bitcoin), attitudes towards all cryptocurrencies, attitudes towards ICOs, and attitudes towards blockchain are four attitudes that must not be confused. We'll discuss them separately, but let's start with what we know about Bitcoin.

The consensus system created by the blockchain is a kind of institutional "natural consensus", so this natural consensus proves that it is superior to any "secular consensus" in terms of credit origin. The representative of the "secular consensus" in the field of money is legal tender. The first innovative attempt of "natural consensus" in the field of money was cryptocurrencies. However, there are still great challenges to whether such innovations will ultimately be proven successful, and in particular whether the specific innovations seen so far can be confirmed to be available. The following discussion is aimed at analyzing the properties of these innovations from a logical point of view, in order to help predict the future of these innovations. (The above references to "natural consensus" and "secular consensus" are for the convenience of discussion, for my own creation, and if there is something wrong, I can discuss it.) In my opinion, the concepts of the state and the government belong to the secular category, and the natural foundations created by technology belong to the natural category. ）

Cryptocurrencies are naturally superior to any fiat currency from the perspective of credit origin, and the immutability, non-repudiation and irrevocability of blockchain provide an excellent tool for credit. At the same time, this non-repudiation, non-tampering and irrevocability is unprivileged, equal, and does not require third-party credit or guardianship, which is the key to the revolutionary innovation of blockchain technology. However, wait a minute! Although cryptocurrencies have triumphed over fiat money from the credit source itself, whether they can be accepted by "users", especially whether they can be adopted by "how many" users and start using, then re-enter the "secular" category. Cryptocurrencies with the attribute of "natural consensus" still need to go through the threshold of "secular consensus" if they want to be widely accepted, which is the first concept that is generally confused in the blockchain industry. I hope that in future discussions, there will be a general separation between the "natural consensus" and the "secular consensus", rather than a mixture, which will be very helpful in understanding the current complex situation. The "natural consensus" is pure and pure, while the "secular consensus" is complex and changeable. So, can the "natural consensus" possessed by cryptocurrencies logically evolve into a universal "secular consensus"? (The word "credit" mentioned in the above discussion is also a very abstract concept, which will not be discussed here, in fact, credit can also be divided into "natural credit" established by natural laws and "secular credit" established by secular methods according to the above logic)

Because the overall number of bitcoins is limited, and the real cost of mining in order to obtain bitcoins, they can be compared with traditional gold, so Bitcoin is often compared to "digital gold". So, let's follow this logic and do the opposite, using the logic of the cryptocurrency field, reduced to the concept of the traditional social field, to provide us with a new perspective on cryptocurrencies.

If we continue to use the traditional gold analogy to Bitcoin, then the various other currencies in the cryptocurrency field must make us carry out the following extended analogy, that is, there is not only one variety of "gold" in the real world, in addition to "gold", there are green gold, blue gold, lapis gold, pink gold, red gold, black gold, flower gold, transparent gold, blue-green gold, yellow-green gold, red-green gold, red-green blue gold and so on. Then, even if the overall number of any single variety of gold, green gold, and pink gold is limited, the varieties of gold are endless and diverse, so the total amount of various "gold" added together is actually unlimited.

The above examples of green gold, blue gold, pink gold, and various gold are in order to correspond to the discussion of various cryptocurrencies at present, such as various forked Bitcoins, such as BCH (Bitcoin Cash), BTG (Bitcoin Gold), BTD (Bitcoin Diamond), Ether, Ripple, Litecoin and other various types of cryptocurrencies, and even tokens, including tens, hundreds, and thousands of native coins, altcoins, derivative coins. As we all know, almost all cryptocurrencies enjoy the same "natural consensus" status, in principle, even thousands of "altcoins" with a fairly low status in the industry, in fact, their origins are completely equivalent to the original genuine Bitcoin.

If human beings do have thousands of varieties of gold, the "yellow" gold, or because it was first discovered, the earliest to be used, the oldest, or because of worship, how likely is it to stand out among all kinds of gold, and what number of users can it be accepted and adopted and used, thus becoming a more universal basis for value exchange? This process of secular consensus-building, in the early stages of its development, is particularly similar to religion. It is precisely in the early stages of the emergence of cryptocurrencies, and how far and how long this secular cult can spread has a direct impact on the short-term price direction of Bitcoin. Technically, all virtual currencies added together are infinite in number, thus losing the premise of a limited aggregate – unless some "secular" consensus is reached that enough people insist on using one or more particular cryptocurrencies to bring the premise of a limited aggregate back to reality.

As a summary, cryptocurrencies are based on a "natural consensus" that is inherently superior to a "secular consensus." But cryptocurrencies have countless branches, and the process of how many users accept them re-enters the category of "secular consensus". In the early stages of development, the Bitcoin phenomenon was very similar to a religious phenomenon. Under normal expectations, the cryptocurrency family will undergo its own evolution and iteration, making it more and more reasonable and practical. This means that when a higher stage comes, the color of worship and belief will decline, the elements of pragmatism will rise, and the ecological advantage will become dominant. In fact, the so-called ecological advantages have appeared in the initial stage of the current cryptocurrency, such as what type of cryptocurrency trading is supported by various cryptocurrency exchanges, where tokens can be issued, and what platform the system runs on (in fact, most applications are not running at all). However, at present, this ecology is still very rudimentary, and it is difficult to call it a strong ecological closed loop. We will continue to discuss this aspect in the following content.

Therefore, Bitcoin is not a supreme, unique, irreplaceable myth, but will be subject to the rules of "secular" choice and survival of the fittest. It is the first innovation of cryptocurrency, representing the first generation of innovation, and its mystery may be precisely because you do not understand, so it is "not aware". This innovative product has shown a certain vitality and demand, but it still needs to go through the test of the market, and its development potential cannot be underestimated, but how to evolve is crucial. In order to understand what Bitcoin really is and whether it is reasonable, we must first understand the value law of Bitcoin and initially establish the Bitcoin Economic Model. (Author: Zhang Xiangning, Founding Partner of Qingyi Investment)