In fact, this is a good question, and it is also the main problem that most people dare not trust in Bitcoin.

Many people think that the reason why Bitcoin is valuable is because it is "rare". If Bitcoin is no longer "rare", then it will have no value.

This is a misunderstanding. Let’s think about a question: What is the essence of all “currency”?

The answer is trust. The biggest reason why the U.S. dollar is valuable is because of the credibility established for the U.S. dollar under the Bretton Woods Agreement, not the so-called equivalent exchange with gold (although others say that). The main reason why the RMB is valuable is because of the trust system of the RMB in China and neighboring countries, rather than the exchange with US dollar reserves (just look at the offshore RMB). This can explain the significant depreciation of the currencies of some countries (such as the Russian ruble, and the Zimbabwe dollar that you all know), because the government and the current world situation have led to a trust system that does not support the existence of this currency, so-called economic sanctions, and Currency speculation is a very superficial and superficial reason.

The essence of currency is trust.

So, what about Bitcoin?

Bitcoin is a currency that does not have a centralized trust measurement institution. The value of Bitcoin, that is, its "credit system", comes from the distrust of centralized units. Every country has found that seigniorage is too easy to collect, and drinking doves to quench thirst has led to increasingly poor trust between countries, and even the people of each country themselves have distrust of the country's currency.

Trust, like quality, is conserved. Trust in centralized currencies decreases, while trust in decentralized currencies naturally increases.

This is the essential reason why the value of Bitcoin continues to increase. Therefore, for digital currencies such as Bitcoin, there are only two endings. Either countries will figure out that they will no longer issue more currencies, issue more currencies in a scientific and reasonable way, and all countries will unify and stabilize exchange rates and maintain the credit system of centralized currencies. Then The value of currencies like Bitcoin will be infinitely close to 0. Either countries will continue to quench their thirst and use the method of over-issuing currency to collect seigniorage from everyone even more crazily, then trust in centralized currencies will become less and less, and decentralized currencies like Bitcoin will The total value will be infinitely close to the total labor production of all units that do not trust the government and other governments, but need to engage in international trade.

Either the price is insanely high or it’s worthless.

So after understanding this, you can answer this question. Since you can create another currency, then if there are more currencies, isn't it equivalent to the issuance of additional digital currencies? At this time, there is no need for the country to collect seigniorage. Scammers such as Li Xiaolai and even Lao Wang next door can come and shout, "I spent 10 minutes changing the core of Bitcoin and created a new digital currency called SBC, SB come and participate in my ICO and pay me seigniorage~".

So, if this happened, would you immediately choose to use Lao Wang’s SBC next door?

The answer is that speculators will participate to some extent, but the market will not. The reason is simple. The new cryptocurrency has not been recognized by the market and has not been applied. There is no way to exchange this currency for production materials. Then this currency is not a currency, but a virtual commodity used for speculation.

In other words, even if Lao Wang next door ICOs an SBC, no one will choose this currency except those brainless speculators.

Then another question arises. Suppose Lao Wang is so awesome that he has set up SBC counters all over the world. Lao Wang is the largest condom manufacturer in the world. Using SBC, you can buy them cheaper than the market price. Condoms, then, didn’t Lao Wang create a market for SBC and allow this currency to circulate?

The answer is, yes.

Lao Wang paid a high cost by producing condoms, bearing losses below market prices, and distributing goods globally to create liquidity for this digital currency. And this liquidity will not be limited to buying condoms. People who want to buy condoms at low prices can spend other currencies, such as Bitcoin, in exchange for SBC, and then buy condoms, thus reducing the cost of buying condoms directly with BTC. the cost of. So, who will bear the losses?

The answer is Lao Wang.

In other words, Lao Wang must pay an extremely high cost to change the existing digital currency ecology and give his currency the possibility of impacting the market.

Then two questions arise.

1. Will Lao Wang be willing to pay such a high cost to promote a new digital currency?

2. If Lao Wang pays such a high cost, will this digital currency really impact the market?

To answer the first question, we first have to answer the second question. The answer to the second question is actually very simple... Unless Lao Wang has the ability to monopolize a product that is urgently needed, even if Lao Wang pays such a high cost, this digital currency will still not be able to impact the market. It is very simple to understand...

You exchanged BTC for SBC to buy condoms, which gave SBC liquidity. The reason why you did this was because the price of buying condoms with SBC was lower, and Lao Wang borne this part of the loss. A person who owns other commodities, such as bread, will also choose to accept SBC because he may need condoms at night, so he will choose to reserve some SBC.

So, in fact, money has increased.

The next step is interesting. Because the liquidity of SBC has been introduced into the market, Bitcoin is not as valuable as before. Because SBC can buy condoms cheaper, and BTC can be exchanged for SBC, which indirectly leads to the price of buying condoms with BTC. It has also been reduced, otherwise other merchants selling condoms will not be able to sell them. Compared with stocking up, selling at reduced prices is a better method.

And if other merchants lower their prices, Laowang's SBC will lose its competitive advantage, and Laowang must further reduce the price of condoms purchased by SBC. In the end, either Laowang monopolizes the condom market and other merchants cannot lower prices, or condoms and SBC will continue to lower prices until Lao Wang can no longer afford the cost.

What will happen if Lao Wang can no longer afford the cost? The answer is that it won't drop in price anymore. So if SBC no longer has a price advantage when buying condoms at this time, everyone will choose the more liquid BTC. If Lao Wang is willing to sell condoms at the current Nash equilibrium price, Lao Wang will continue to bear losses. And SBC has obtained the liquidity under the current Nash equilibrium. And if Lao Wang has gone bankrupt...

Then SBC will no longer be able to buy low-priced condoms, and SBC will become something similar to a collectible and slowly lose its circulation. Either it becomes a tool of pyramid schemes for speculators, or it just disappears and no one cares about it.

So, after understanding the second point, you know that if Laowang is not strong enough to monopolize an entire market, it will definitely not choose to promote such a digital currency.

But what if Lao Wang has the ability to monopolize the market?

Then he can just push it... He already has this ability, what else can I say?

In real life, various countries have also discovered this problem. The distrust between countries and the people's distrust of the government will inevitably lead to an increasing increase in the circulation of digital currencies. Therefore, many governments choose to become Laowang to support a digital currency. A digital currency. For example, Japan supports Bitcoin and Russia supports Ethereum, nothing more than that.

To seize the circulation of digital currencies that are beneficial to oneself is to seize the seigniorage of the next era.

The common phenomena of the market economy, inflation and deflation, will still occur in digital currencies. It's just a little different from the way you imagined.