Full text of Mai Gang's 2014 speech: Bitcoin can simulate perfect currency and will eventually become a tool for multinational gaming

Speaker: Mai Gang, Founder of Startup Factory

Compiled by: Xu An/iDark Horse

The most essential thing in economics is money.

Before the financial crisis, I read a book about a famous physicist. He said that we, the people in science and engineering, study length, width, weight, and time in physics, which are all constants. You, the people in economics, study variables.

For example: "How much is a McDonald's worth?"

You have to ask whether it is US dollars, RMB, or Japanese yen?

You have to ask, is it the US dollar in 1958 or the US dollar in 1985?

After reading it, I suddenly realized that economics studies things that change. I majored in economics in college, so I should look back at the most essential thing in this discipline that has been changing all the time - currency.

Later, some books, such as "Currency Wars", attracted the attention of the whole nation to currency. I basically had a relatively comprehensive understanding of currency, so when Bitcoin appeared, I had only one word: "Wow!"

Bitcoin captures the essence of money

What is Bitcoin? Explain it in two sentences.

1. Bitcoin is a perfect currency that mathematicians, geeks, and network scientists have simulated using distributed algorithms;

Second, this property is maintained by the computing power of distributed and extremely powerful computers.

Bitcoin is this thing. All discussions, doubts, questions, and innovations about Bitcoin all go back to this framework. Therefore, Bitcoin is not a conspiracy, but an open conspiracy. It is clear what Bitcoin does. All data about Bitcoin can be found online at any time and by anyone. Bitcoin has grasped the essence of currency. What it does is to simulate a perfect currency.

Why can Bitcoin simulate perfect money?

1. Bitcoin’s monetary properties surpass precious metals

The history of currency is 5,000 years, and the history of the state is 3,000 years. Currency is a concept that appeared far earlier than the state. Therefore, China's currency has gone through a variety of choices, from feathers, shells, stones, livestock, and even women as the currency of some countries at that time, until the emergence of precious metal currency.

Precious metals cannot be counterfeited or the cost of counterfeiting is extremely high. They have low transaction costs, are relatively easy to store, can be divided, and are relatively soft. These are the properties of precious metals. Therefore, precious metals are circulated as currency. Gold trading still has costs. When exchanging from one place to another, there are risks in delivery and payment. Many people are not aware of this.

The total amount of Bitcoin is limited and distributed. Anyone with a computer can do it and participate. It is very equal. Bitcoin is a commodity simulated by mathematical methods. It has all the properties and characteristics of precious metals and surpasses the precious metals in the past in all properties and characteristics.

Moreover, the Bitcoin network can continue to upgrade, so there will not be a problem of gold being out of stock like it was in the past. For digital currencies, there is no such problem.

(II) It is unlikely that Bitcoin will be forged

First, computing power is enormous and is controlled by all kinds of people in the world. It is difficult for one person to control so much manpower and computing power at the same time.

Second, even if someone has the opportunity to master these computing powers, from an economic and logical perspective, this person should control the network instead of attacking it, because his property is Bitcoin, and he will not destroy his own property. Therefore, this is a probability problem and a logical problem.

Third, Bitcoin transaction costs are low, which is a particularly important feature. The total number of Bitcoins will be permanently limited to 21 million, and Bitcoin can now be divided into 8-digit calculation units after the decimal point (0.00000001BTC is the current smallest unit), which is the existing calculation system of Bitcoin.

3. Bitcoin network is an advanced clearing and payment system

The Bitcoin network is a fully automated clearing and payment system that is not managed by anyone. Bitcoin is the circulation unit generated by this network. This network is a natural clearing and payment system that does not need to be managed. The use value of Bitcoin is reflected in the fact that it is a clearing network.

Western Union, an international remittance company in the United States, has a history of more than 150 years and makes billions of dollars in profit every year. It is widely used in some relatively underdeveloped countries. It helps customers remit money, and the arrival time is one to two weeks, and the fee is 5 to 8 points. What a lucrative and wonderful business.

Bitcoin payments are basically credited to the account in a few minutes or ten minutes, and the handling fee is very, very low. Therefore, companies such as VISA represent the technical architecture and foundation used by our existing financial circulation system and commercial banking system in the past, and Bitcoin has surpassed the past system with its new technical architecture and foundation. Therefore, this is the advanced feature of Bitcoin in the circulation network and the exchange function of commercial banks.

Decentralization is the guarantee of Bitcoin security and freedom

There are three forms of currency in human society. One is the currency system represented by precious metal gold, and the other is credit currency supported by government credit. In the era of credit currency, the problems we generally see are inflation, excessive money supply, and currency wars. The currency system we are in today is represented by the US dollar, the US dollar is hegemonic, and the US dollar is flooding the world. People all over the world, especially the poor Chinese, are working for the United States. Why do American jeans cost 10 or 20 yuan, but they have to sell for 100 yuan in China? All of this is because the US dollar is a global currency, and the US dollar has achieved this day by using its hegemony.

However, the emergence of Bitcoin has ushered in the third era of currency. When I say the third era, I don’t mean to replace the first two. It’s like the emergence of the Internet, which did not replace fax machines and telephones. They coexist. This is decentralization, a virtual currency based on mathematical concepts. Decentralization is the guarantee of Bitcoin’s security and freedom.

Bitcoin is supported by credit and will exist for a certain period of time

Currency needs credit to support it. The country's credit, state power, state machinery, army, and law can support credit currency. What supports Bitcoin?

It's very simple. There are many credits in the world. Someone swears, "I love you forever"; someone promises, "I will mortgage all my property"; I promise, "I was a good student in the past..." These are all credits. What is the credit of Bitcoin? It is mathematics and probability. If you believe in mathematics and probability, it exists.

I think Bitcoin will exist in the field of circulating currency for a certain period of time. In certain economic activities, especially those related to the Internet, internationalization, and virtuality, Bitcoin will exist as a form of circulation because it is unrestricted.

Bitcoin is a tool for multi-party gaming

Let me ask you a question first. After Bitcoin came out, which country is most afraid of it? — The United States.

This explains why the EU was the first region to support Bitcoin, because when the big brother is beaten, the second brother is happy. So, this is a very subtle and interesting game. The California Congress has declared Bitcoin a legal currency, of course, it still needs to go through the House of Representatives vote. Bitcoin is a big innovation in the financial field, of course it will bring a series of new regulatory behaviors, we must study it, this is the attitude of the US government. The Chinese government actually has a similar attitude, but new things often bring some new challenges.

I would like to emphasize that the Chinese government and people must understand the variability and foresight of the US monetary strategy and the complexity of the global multi-national game. Bitcoin is not a carnival for libertarians and anarchists, but a tool for multi-party games.

Everyone should pay attention to and learn about Bitcoin

I am not an anarchist, nor do I advocate that we use Bitcoin instead of RMB today. But I can tell you that in the next 10 years or 30 years, the United States will rebuild a global monetary system, and in this global monetary system, the United States is likely to link the US dollar to a new series of assets, including virtual currencies represented by Bitcoin. Before doing this, the United States only needs to do one thing, which is to gain a voice in the field of Bitcoin. This voice may be computing power, reserves, or pricing power. Why does the United States have an advantage in doing this? Because the United States has Wall Street, which is the elite of the global elite.

I have a hypothetical story about Bitcoin. If Bitcoin becomes a global asset 30 years from now, a child might have the following conversation with his father.

Child: "Why do only Americans and Europeans have Bitcoin, but no Chinese?"

Dad: "Baby, I'm sorry, Dad was rich when he was young, but at that time money could buy love in China, but it couldn't buy Bitcoin."

Child: "Dad, where can I buy Bitcoin?"

Dad: "If we continue to make socks and shoes for another 30 years, we can exchange them for Bitcoins with the Americans."

I hope everyone, including government agencies, should realize the greatness and complexity of the Bitcoin game, which is truly related to our future generations. In the last century, Americans used the power of the dollar to obtain the right to mint the dollar and made the whole world work for them. If Americans use it for a few more decades to gain the right to speak on Bitcoin, they will continue to make the whole world work for them.

I hope that Chinese entrepreneurs, Chinese companies, and ordinary Chinese people will have a say in the Bitcoin field. I also hope that everyone will pay attention to and learn about Bitcoin.