Not long ago, the total value of bitcoin in the world exceeded one billion dollars for the first time. This is a remarkable achievement for a pure virtual currency without the support of the central bank or other authoritative institutions. But this is also temporary: we are experiencing a bitcoin bubble, and it is only a matter of time before the bubble bursts.

There are several reasons why bubbles are doomed to burst. The first one is: because it is a bubble, no matter what chart, if it grows like the above picture, it will surely usher in the end of Lacrimosa at some point. But there is a deeper reason-Bitcoin is a strange mixture of goods and currency. The commodity value of bitcoin is generated by its monetary value, but as its commodity attributes become more and more significant, its use as a currency becomes less.

However, it is still valuable to study the deeper bitcoin bubble, because it contains fascinating connotations for all those who care about payment, money or trust.

The best payment method ever

First of all, let's go back to the Sunday evening on June 12th, 211. On that day, the first large-scale bitcoin robbery occurred in history: such a simple and rude theft might even be regarded as a perfect crime. A man-we only know his name as "all in vain"-left his Windows computer open and connected to the Internet before going to bed that night. There are 25, electronic currencies in the digital wallet of this computer. When he woke up on Monday morning, his wallet was still there, but the money was gone.

at that time, those 25, bitcoins were worth about $5,; Today, they are worth about $3.5 million. If he had noticed it in vain in the minutes after the theft, he might have kept the money. But he fell asleep-and ten minutes after the theft, it became an irrevocable fact. It's all in vain to get the money back unless the thief gives it back.

no one can find the person who stole it in vain. This is because Bitcoin was designed as a perfect anonymous payment method in the digital world by another mysterious netizen with an alias of "Satoshi Nakamoto". This is one of the characteristics of Bitcoin: once paid, it cannot be recovered. Similarly, if someone pays you bitcoin, you will undoubtedly become its owner. You don't need to know or trust the payer-you just need to know that the money has entered your virtual wallet, waiting to be saved or spent by you.

bitcoin is designed-and in many ways, has become-the perfect digital currency: no partial reserve system, anonymity, and extremely high encryption security. For anyone who has suffered from the incompetence of banks, or who is dissatisfied with the extra fees incurred when making payments at home and abroad-that is, all of us, Bitcoin may achieve the ultimate vision of payment. What is particularly attractive is that bitcoin is essentially undetectable for law enforcement and tax authorities.

but these advantages are also weaknesses. No one wants to risk losing millions of dollars worth of money overnight, just because a computer hacker is better than them.

but for now, bitcoin is still the best and cleanest payment method in many aspects. Therefore, if we want to create a better substitute, we must learn from the advantages of Bitcoin-but also learn from its disadvantages.

Bitcoin: Analysis of features one by one

The source code of Bitcoin is open and public, which means that every hacker and decoder in the world can try to crack it. And they all came to the same conclusion: this algorithm is really reliable. There are still doubts about its anonymity and scalability, but when Bitcoin came out in early 29-at the cusp of the global financial crisis-it immediately attracted a group of people with anarchist utopia ideals. These people are liberals in high-tech industries, and they are driving a lot of network innovation.

The distrust of existing financial institutions by these people, including Satoshi Nakamoto, is by no means unique. What makes Satoshi Nakamoto different is that he turns this distrust into a philosophical idea, which is the most important driving force behind the Bitcoin project. When he introduced Bitcoin to the world in February 29, Satoshi Nakamoto boasted that his new currency was "completely decentralized, and there was no trustworthy party". Moreover, he explained in great detail the problem that he thought needed to be solved urgently:

"The fundamental problem of traditional currency is the trust needed to make it work. We must trust the central bank not to devalue the currency, but the history of legal tender is full of betrayal of this trust. We must trust the banks to keep our money and transfer it electronically, but they still lend it without reservation in the rising credit bubble. We have to entrust our privacy to them and trust them not to let imposters take money away from our accounts. "

Satoshi Nakamoto is not paranoid: what he said here has nothing to do with Warren? What Buffett said in his letter to shareholders in 212 is not very different.

"Under the existing monetary system, the known investment types include money market funds, bonds, mortgage loans, bank deposits and other ways. Most of these money-based investment methods are regarded as' safe'. In fact, they belong to the most dangerous asset form.

"In the past century, these investment methods have destroyed the purchasing power of investors in many countries, even though these investors can continue to reap the principal and interest in a timely manner. In addition, this terrible consequence will recur again and again. The government determines the final value of money, and systematic factors occasionally bias them towards policies that trigger inflation. Such a policy will get out of control from time to time.

"Even in the United States, a country that strongly calls for currency stability, the dollar has depreciated by an astonishing 86% since I took over the management of Berkshire in 1965. What a dollar can buy at that time costs as much as $7 today. "

if you hold dollars, you should trust the U.S. government not to destroy your wealth. In contrast, Bitcoin is based on distrust-it is deliberately designed as a "everyone for himself" currency. It's all in vain because his stupidity has been accused by many people in the bitcoin world: what does he think of storing the e-wallet on a networked Windows machine?

but even when using bitcoin, people eventually have to trust others-and the objects they trust often turn out to be unreliable. MyBitcoin was later found to be a scam; Mt Gox was attacked by hackers. At present, Coinlab is a popular emerging bitcoin company, but considering the benefits that can be brought by hacking these companies, and law enforcement agencies have no interest in such criminals, they always face the risk of losing their customers' property.

Zero trust

The degree of distrust of Bitcoin is both a feature and a loophole-in fact, most of us are willing to outsource the task of hoarding wealth to a trusted large organization, instead of hiding $1, under the black volcanic rock in the stone wall of an old oak tree, or wrapping a $1 bill with aluminum foil paper and hiding it in the refrigerator. Managing bitcoin by yourself is risky and requires high computer skills. However, the trust needed to entrust your own bitcoin to others is exactly what Bitcoin aims to avoid.

Bitcoin's inherent suspicion of financial institutions not only distinguishes it from legal tender, but also from other virtual currencies, such as Facebook coins in the United States, Q coins in China and Linden coins in second life, the world's largest virtual game. All these virtual currencies are under the strict supervision of the company that invented them, and they are almost worthless outside these specific economic systems.

some of these virtual currencies are about the same order of magnitude as bitcoin, although it is difficult to compare them in the same sense. For example, the annual revenue of Facebook coins is about one billion dollars. In 27, the market of Q coins was so big that the People's Bank of China intervened and called on companies to stop trading with Q coins. In the recent bubble, the daily transaction volume of Bitcoin once exceeded $3 million, and most of the time the daily transaction volume was more than $5 million. In this way, the annual transaction volume will be about $2 billion, as long as the bubble does not burst.