Value exists in consensus (trust) and in the transaction itself. Social trust under fiat money is all based on certain practical utility and goods or state polity, while Bitcoin is a spontaneous social contract trust based on decentralization and constant aggregate. The two cannot negate each other, just give the choice back to society and the public.

The 2014 World Cup is over, and while the teams are in the thick of the action, off-field gambling is in full swing, and bitcoin betting is even more sought after due to bitcoin's qualities as a cross-border virtual currency. In fact, back in May of this year, Bitcoin saw a strong rise in the market, and I wonder if it was a warm-up for the World Cup.

On December 5 of last year, China's central bank issued a notice to prevent bitcoin risks, and then in early April of this year, it called a halt to banks' involvement in bitcoin trading, sending the price of bitcoin to the freezing point. For most people, bitcoin is still a mystery, just a novel concept that appears in the news. But in the eyes of bitcoiners, bitcoin is still on the rise and has the responsibility to change the world. I also believe that the time for Bitcoin to shine has not yet come and that the development of Bitcoin must be given a high degree of attention, especially by central banks and government policymakers.

Is Germany the "World Champion" in accepting Bitcoin?

The 2014 World Cup was won by Germany, but many people may not be aware that Germany has a very high level of acceptance of bitcoin and could be a "world champion" in this regard. On July 11, German bank Fidor Bank AG entered into a partnership with bitcoin.de, Germany's largest bitcoin trading site with 70,000 users, and on August 19, the German Ministry of Finance issued a statement recognizing bitcoin as a "unit of account. It is neither an electronic currency nor a foreign currency, but more of a "private currency" that can be used in "multilateral settlement circles".

Many people admire the seriousness and rigor of Germany, so if Bitcoin is not reliable, just a bunch of crooks or crazy people, how can mighty Germany take it so seriously? I believe that Bitcoin will not touch the existing monetary system for quite some time. However, if a country does not pay attention to and study Bitcoin, especially the formation mechanism behind it, then it is likely to lose a head start on its future economic strategy.

The 2008 financial crisis is far away, but the impact on the world economy has not yet dissipated, and the nerves of the international financial markets are still being affected by when and how QE will be withdrawn. And then think about the previous European debt crisis, the Middle East, Africa and some other countries outbreak of hyperinflation, it is clear that the dollar hegemony dominated the monetary system kidnapped the world. This monetary system was formed after the dissolution of the Bretton Woods system, which is only 40 years. The Bretton Woods system was formed at the Bretton Woods Conference in 1944, when White of the United States and Keynes of the United Kingdom had a moment, White proposed the "White Plan", which regarded gold (and the dollar) as the anchor of monetary stability, while Keynes came up with the "Keynes Plan Keynes came up with the "Keynes Plan", proposing the establishment of an "international clearing union" and a supranational sovereign currency called the "bancor" (bancor). The final result is well known, "White Plan" won, which is the real comparison of the economic strength of countries after the war.

This shows that the international monetary system is never fair, although it is to a certain extent the product of competition, this competition is often the oligarchic competition, many two or three world countries simply do not participate in the formulation of the rules. Once the financial crisis broke out, it can only be the human sacrifice for the fish, Argentina, Mexico, Iceland, are very tragic examples. The United States is in the hegemonic position of the international monetary system, it can print money at will, the crisis will be transferred, inflationary output, to complete the process of deleveraging.

In addition, any system should be dynamic, with the strength of this and that, the original monetary system will certainly become anachronistic, which often seems unfair to latecomer countries. Take the United States and Germany to compare, the Germans rely on their own hard work and seriousness, in the manufacturing level and industrial technology soared, while the United States is the phenomenon of industrial hollowing out. But when the European debt crisis broke out, Germany had to bear the responsibility of the problem. In our admiration of the United States' ability to innovate, have we considered this question: the United States simply does not worry about capital, even with a huge debt to attract capital into science and technology innovation, because the United States has money printing machines in hand!

"Where there is. And also add to him to call him surplus; no, even all that he has to take over" - this is the Matthew effect in the current monetary system, rooted in the lack of competition in the production and circulation of money. Money is backed by national credit, and the competition between currencies is to some extent a competition between national powers, but the problem is that if a country's currency dominates the international monetary system, then in turn it increases national power and the hegemonic position of its currency becomes more secure, and this is the source of the imbalance in this world.

The real significance of Bitcoin is far from being discovered

In The Denationalization of Money, the famous thinker Hayek asks: If it has been proven in other areas that competition produces efficiency and good products, is it possible to compete in the area of money production and circulation as well? Specifically, by abolishing the central banking system and allowing private institutions and private individuals to issue money and compete freely, the process of market competition would lead to an efficient monetary system in which only a stable currency could survive.

It should be said that Bitcoin is almost tailor-made to inherit this idea, but with a breakthrough. Hayek lived at a time when there was no Internet, so he could only conceive of fully circulating interest-free bonds, similar to private institutions, to break down the barriers of fiat money. The distributed, decentralized, and peer-to-peer features of the Internet provide a platform with unlimited imagination for virtual currencies to flourish, a trend Hayek could not have seen coming, but his ideas live on. Bitcoin may eventually fail, but it is absolutely extraordinary for the exploration of competing production currencies.

First, Bitcoin's idea of decentralization is a subversion of the existing inequitable monetary system. The dangers posed by an international monetary system under the hegemony of the dollar have already been discussed. As long as the production of money is not fully competitive, inequity is bound to arise. Simply put, the closer the "region" to the money, the richer it is, and the more predatory the "region" at the periphery, which can be a country or an industry. Bitcoin, on the other hand, was created in a fully competitive environment where everyone could "mine" it, and even the founder, Satoshi Nakamoto (a pseudonym), whose identity has been confused and has now disappeared.

The decentralized nature of Bitcoin lends itself to the networked, clustered organizational form of the Internet era. Of course, a country's fiat currency is also a centralized currency, so the same serious imbalances can arise, a phenomenon that was recently profoundly dissected in a very popular book, Capitalism in the Twenty-First Century. So, is competition among fiat currencies a solution to the problems in the international monetary system? Competition in fiat currencies depends on competition in national power, and national power can vary from one to another, but reversal of the contrast in national power, or getting the leading country to give up its currency - a symbol representing a country's status - is often done through war, and almost every world war is related to the struggle for and change of dominance of the international monetary system, which is too costly!

Why is Germany so receptive to Bitcoin? Is the government not afraid of losing control over the issuance of its currency? Of course not. The acceptance of Bitcoin is an attempt to show an attitude - whether it is possible to shock an unfair monetary system in a peaceful way in the Internet age. In fact, many countries around the world, including the U.S., allow private issuance of currency. in 2006, a private company issued a private currency, BerkShares, in the Berkshire region of Massachusetts, U.S. No country wants to lose its head start in an era where the Internet is changing everything, and while China has Although China cracked down on Bitcoin a while ago, trading platforms like Hotcoin are still booming, and China is still the world's largest producer of "mining machines," so the government won't be stupid enough to stifle its citizens' exploration in this area!

Second, the cross-border peer-to-peer transactions served by Bitcoin are in line with the "world is flat" trend of the Internet era. Money, both as a measure of value and as a means of circulation, is for transactions. In the primitive era, the scope of transactions was very narrow, and bartering was good enough. With the emergence of city-states and nations, the scope of transactions expanded, and money became necessary. In the era of globalization, it is obvious that using gold and silver, which are limited in production and unevenly distributed, as currency is out of place. So, can't the Internet age call for a new kind of currency?

The most distinctive feature of the Internet era is decentralization and self-organization, the production and lifestyle are less and less restricted by geographical and national boundaries, and more willing to be together with people who share the same interests and values. Maybe a company of a dozen people, with members spread all over the world, produces through the network. Maybe a person wants to live in another country, so he or she communicates with people through Facebook and swaps homes. Please believe that the trend of "disintermediation" is irreversible, which means disintermediation and peer-to-peer transactions. Several important models of Internet finance - P2P, crowdfunding, and electronic payment - are all decentralized and peer-to-peer in their core qualities. Then. Will fiat currencies, which are based on national credit and produced at the center of central banks, become the dinosaurs of the 21st century?

Again, Bitcoin is backed by intrinsic value and is not necessarily any less reliable than fiat currency. Is a fiat currency backed by state credit necessarily reliable? At least in China, hard-working working people have been fighting inflation in recent decades, and if they don't buy a house, or buy a house at the wrong point in time, then it's likely that years of labor income will go down the drain because the value of the currency is too unstable and inflation is too strong. Fiat currency backed by the credit of the state is unconsciously devalued because the government has a natural tendency to issue money indiscriminately, an implicit tax burden that supports an increasingly large government.

Value exists in consensus (trust) and in the transaction itself. Social trust under fiat money is all based on a certain practical utility and goods or state polity, while Bitcoin is a spontaneous social contract trust based on decentralization and a constant aggregate. The two cannot negate each other, just give the choice back to society and the public. One reason to be dismissive of Bitcoin is that it is deflationary, but in reality, we have demonized deflation. Instead of destroying the economy, predictable deflation will boost it. If the monetary system returned to honest money, people would be more willing to work hard and keep innovating rather than allowing constant inflation to rob people of their wealth.

When the adoption of Bitcoin was still a nine-to-one percentage of worldwide transactions, it didn't make much sense to explore topics like deflation. However, as more and more regions and merchants accept bitcoin, it will become clear that bitcoin is actually quite reliable.

Finally, the Bitcoin system will cost less to run than the existing monetary system. There are costs associated with the production and circulation of money. The current monetary system is centralized, like a bureaucratic organization under imperial power, and it is necessarily bloated and inefficient. After the financial crisis, some financial institutions are too big to fail, and these "bureaucrats" can kidnap the country and the people. But Bitcoin doesn't have this problem. It is mined on a global network, and the cost is the price of the mining equipment.

In short, bitcoin is still a brand new thing, and for most people it's still very esoteric and incomprehensible. But don't forget that most people are limited to the time they live in. When handymen were faced with the industrial revolution, they didn't expect to see a complete change in the way they lived and produced, and many seemingly unattainable dreams have since become reality. Today's monetary system has existed for less than half a century and has revealed all sorts of problems, so who says the future can't change? So, it's important not to be indifferent to Bitcoin. If it's too difficult for ordinary people to understand the words "computing power", "mining", and "P2P architecture", it's a big no-no for a country's policymakers not to pay attention to them. The problem is that it is too difficult for ordinary people to understand the terms "computing power", "mining" and "P2P architecture".