In 2008, a man named Satoshi Nakamoto wrote an article and posted it on the Internet. The article was about his new expectation, new vision for electronic currency. From then on, Bitcoin became known to the world and became famous around the world. But what is bitcoin? I don't think many of you know that bitcoin is a kind of Digital currency in the form of P2P.
Let me give you a simple example that should make sense to you. The owner wanted his employees to be more active in their work. Finally, the owner came up with a doctrine. In the form of points, people who work well and diligently will be rewarded with points. Finally, you can redeem the points for vacation. There is an accounting bill that keeps track of changes in points. The owner thought this was a good idea. The employees worked very hard and actively. The owner felt very happy. But after a few months, Tom realized that something was wrong. Every day he got up earlier and went to bed later than Ben, and the question of why he got more points than he did puzzled him. So he explained the situation to his boss.
The owner sensed something was wrong when he saw Ben and Bill quietly exchanging extensions. After some thought, the store owner decided to make some adjustments: The store owner decided to remove Bill from keeping track of his points. Everyone is supervised together, and the credits of employees are reviewed by them after work every day. The boss also added a rule that the first person to calculate today's point change would get points as a reward.
The store owner's new rules are very similar to the basic principles of Bitcoin: 1. There is no single person responsible for keeping score, everyone has their own ledger, which is what we call decentralization. 2. Everyone can use the points earned to exchange for holidays or currency, which is digital currency. 3. Peer to peer is reflected in the supervision system, where everyone can supervise each other. 4. Bonus points are calculated first. 5. Credits cannot be duplicated and are limited.
Because Bitcoin is non-replicable and finite. You can track the change of bitcoin points, and if there is a small change, it will be shown in everyone's ledger, so that no one can cheat anyone, keep more credits. Vacations are not available all the time, they are limited, which makes sure that credits are limited, and bitcoin is also limited, the maximum amount of currency available is 21 million.
From the perspective of economics, the two characteristics of bitcoin are unreplicable and limited, which make bitcoin more rare and scarce. In addition, with other advantages, bitcoin becomes promising. Its value is unimaginable and it has the potential to replace legal tender. So the price of bitcoin can go up indefinitely, just like gold and diamonds.
But if you think about it, does Bitcoin have everything it takes to replace legal tender? The answer is clearly no. The basic function of money is to facilitate people's transactions, rather than collection and speculation. The limited nature of Bitcoin, however, increases its collectibility and hype, which is not in line with the role that ordinary fiat currencies are intended to play. Because Bitcoins are limited, people will want to hoard them, which will lead to fewer and fewer Bitcoins circulating on the market. The price will gradually rise, which will promote its scarcity and eventually lead to an economic collapse in an endless cycle.
