Stay Away from the Bitcoin Myth

Caifu Magazine | by CAIFU Magazine

On the evening of September 14, 2017, Bitcoin China (BTCC), China’s first bitcoin exchange market, announced that it would stop new user registration on its Digital Asset Trading Platform, taking effect the same day. It would close all trading business on September 30, 2017.

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Bitcoin is built on blockchain technology, which can also be simply called a distributed billing system. As a technology, it still has its application value. However, bitcoin, running on blockchain technology, is only a computer program, and is not necessarily associated with the real currency. Those bitcoin promoters desperately want to link bitcoins to real currency to provide people with a speculating opportunity.

The legend on the internet is that bitcoin was invented by Satoshi Nakamoto, but no one can explain whether it is really an invention by a person named Satoshi Nakamoto, or if other institutions were hiding behind the name to manipulate it. No matter who invented it, bitcoin consists of a bunch of numbers with an unknown origin.

All of bitcoin’s features are set by a program. Even though there are some absolutely tight means to encrypt and to prevent other people from making changes to the program, there is no guarantee that programmers or programming institutions will not make changes to it. If people take bitcoin as a currency, then it is equivalent to allowing the programming institutions behind bitcoin to control wealth and its allocation, which might be the most horrible deception or plundering in human history.

All the myths propagated by the bitcoin supporters cannot stand tests. The rationale behind the Bitcoin’s skyrocketing price has two theories. First, speculators claim that it is truly a decentralized currency. Second, speculators claim that it is a deflationary currency – namely a currency whose value will only go up as time passes.

The so-called decentralization refers to the process where participants, as long as he or she follows particular rules to operate, are able to produce bitcoins, since there is no central power to control the production of this virtual currency. This kind of preaching makes it easy for people to forget the programmer is actually the power center, who has already prescribed the nature of bitcoin, including the ultimate amount of it.

Once this so-called "de-centralized" technology has emerged, it could be replicated in large quantities. As far as its production process is concerned, bitcoin has the ability to limit the amount of virtual bitcoins to be generated. However, you only need to make a simple change to its source code to create a copycat currency, and there is a great chance that this modified virtual currency is better than the bitcoin currency. Currently, bitcoin-like virtual currencies created are in the hundreds. It can be said that the possibilities of similar future developments are infinite.

Historically, only precious metals, such as gold and silver, are the real deflationary currencies, because precious metals are something that cannot be duplicated and have limited supply. That is why the age-old saying is that human beings issue bills, but only God can issue gold. The so-called bitcoin mining machines frequently reported by some Chinese media is more like bumbling propaganda.

As we know, only a central bank can issue the base currency/base money, and its purchasing power is regulated by the law; thus we call the existing currency legal tender. Although bitcoin makes it look like some power behind the internet is trying to snatch money from the central bank, it will never become a legal tender. This is because an internet institution manipulating the world's wealth is simply not in line with the interest of the vast majority of the people.

As soon as the Pass the Flower by Hitting the Drum game is over, most participants are destined to face the robbery of their wealth, much like the Dutch tulip bubble. Probably only those will benefit from bitcoin: its manipulators, and people who illegally transfer money. In essence, bitcoin hype is a kind of Ponzi scheme. It's hard to predict when a Ponzi scheme is going to collapse and who's going to be the last one to get the flower in a Ponzi scheme; nevertheless, we’d better stay clear from such a game.