I believe that everyone is familiar with a word now, that is "blockchain". Whatever is put together with the blockchain will instantly look futuristic. It can be said that today’s hot words for digital assets are all related to blockchain, such as Metaverse, web3.0, NFT, etc. Blockchain technology is the foundation and underlying technology for the implementation of the above applications. So what does blockchain have to do with Bitcoin, which we are going to talk about today? It can be said that if you want to understand the blockchain and digital assets, you cannot avoid Bitcoin, just like when talking about the first industrial revolution, you cannot avoid Watt's steam engine. If you know what Bitcoin is and its internal logic, you can understand blockchain and digital assets traceably, and understand many phenomena and concepts.
To talk about Bitcoin, we have to tell a story that everyone in the currency circle knows.
"The Most Expensive Pizza Ever"
It is said that at about 12 noon on May 18, 2010, a boring and sunny day, Laszlo, a programmer who lives in Florida, USA, posted on a Bitcoin forum: I want to buy two Bitcoins with 10,000 Bitcoins. A pizza, who wants to take the order? It seemed that he was hungry and wanted to buy lunch. Unfortunately, no one asked him for his address until after 6 p.m. He was suspected of taking an order, but it was canceled immediately. That night, someone else replied and sighed, wow, 10,000 Bitcoins is a lot. Do you think this is a great god who has seen through the future value of Bitcoin? No, this person continued to write, 10,000 Bitcoins, that is a huge sum of money worth 41 US dollars. In fact, what it means is, hey, this thing is just air, which is why some of us programmers and geeks think it is It’s worth $41. If you trade air for pizza, you don’t know who loses.
This post has been up for more than four days. At about 7 o'clock in the evening on May 22, Brother Laszlo announced with excitement that I successfully bought two pizzas with 10,000 Bitcoins. Make money, there are pictures and the truth, why is he so excited? Laszlo started mining very early. His research found that GPU mining has advantages over CPU mining, which can greatly increase the speed. Just one day before he posted about buying pizza, he mined 1,400 Bitcoins in 24 hours. At that time, he had 70,000 Bitcoins, but they were useless. Do you think this thing can be used as food? Hey, this time I can actually exchange for two pizzas. The market price is as high as 25 US dollars. Brother Laszlo used virtual currency to buy pizzas just for fun, but it doesn’t matter. He created the history of buying things with Bitcoin. , and gave him a formal transaction price, 5,000 coins is equivalent to one pizza, and one coin is equivalent to US$0.004. Based on the conversion of 25 US dollars or 150 yuan, the exchange rate of Bitcoin at that time was approximately 1 Bitcoin = 1.5 cents of RMB. The current Bitcoin is 1 Bitcoin = 189,052 RMB, which has increased 12.6 million times in 13 years. In the history of human finance, currency and commodities, there has never been such a crazy legend.
Many years later, people in the B circle designated May 22, the day when my brother bought pizza, as Bitcoin Pizza Day, which is commemorated every year. As for Laszlo himself, he used Bitcoins, which were as ordinary as air, to get pizza that could actually fill his stomach. Such a good thing cannot be done just once. He continued to post and trade, and in the end, instead of buying two pizzas with 10,000 Bitcoins, he bought 14 pizzas with 70,000 Bitcoins. 70,000 Bitcoins are now worth almost $1.8 billion. Laszlo continued mining and sold them all when Bitcoins reached one dollar and bought a new computer. The man who sold pizza in exchange for 10,000 Bitcoins was a 19-year-old boy. Later, he converted all the coins into money, went on a quick trip, and used them all.
Someone later interviewed these two people and asked them if they regretted it? They all said no. I think it’s definitely a lie if I don’t regret it, but I can only comfort myself with that sentence: People can never make money beyond their knowledge.
The book talks about the main text and gets back to the point. I believe that most people have heard of Bitcoin now, but not many people understand it. Bitcoin, a thing that has increased more than 10 million times since its birth, occupies most of the currency circle, is sought after by countless people and despised by countless people, has both the faces of an angel and the devil.
There has also been a two-level reversal in the world's understanding of Bitcoin, from "Ponzi scheme" and "rat poison to the power 2" to "digital gold" and "blockchain genesis".
So what is Bitcoin? ---Past and Present
The essence of Bitcoin can be clearly seen from its white paper - "A Peer-to-Peer Electronic Cash System": Bitcoin is an electronic cash system completely implemented through peer-to-peer technology, which enables online payments to be initiated directly by one party and paid to On the other hand, there is no need to go through any financial institutions in the middle.
On October 31, 2008, Satoshi Nakamoto sent an email to all members of a cryptography mailing list titled “Bitcoin: Peer-to-Peer Electronic Cash Paper.” In the email, he attached a link to a Bitcoin white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.”
This paper published by Satoshi Nakamoto in 2008 may be one of the most important papers in the history of the development of the Internet.
On January 3, 2009, on a server in Helsinki, Finland, the hitherto anonymous mysterious technology geek Satoshi Nakamoto generated the first Bitcoin block, the so-called Bitcoin "genesis block". Announced the birth of Bitcoin.
On that day, Satoshi Nakamoto wrote an unmodifiable sentence in the genesis block: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks (On January 3, 2009, the Chancellor was in the process of implementing the second bailout. On the verge of a second round of bank bailouts),” this sentence was the headline of the Times’ front-page article that day. Through the blockchain’s timestamp service and proof of existence, the time and event of the first block are permanently preserved.
Some say this is evidence and a satire of the global financial system. It was the second year of the 2008 global financial crisis. It can also be said that it was the global turmoil and collapse of the financial situation that caused Satoshi Nakamoto to doubt and think about traditional currencies.
It is precisely because of this kind of doubt and thinking that Bitcoin is facing a situation of ice and fire: On the one hand, Bitcoin, a currency with a calculated constant total, makes many liberals cheer: A new era is coming, and no one can Then it controls us from the currency; on the other hand, it naturally stands in opposition to traditional currencies. As it becomes more and more powerful, many countries have to crack down on it severely.
It can be said that the idealism of Bitcoin is inherent. Its founder, Satoshi Nakamoto, comes from the "cypherpunks" group created by technical liberals. Members of this group advocate the use of technical means to defend citizen privacy in the future digital world. One of the topics is the establishment of an anonymous independent digital currency system.
After the rise of the "cypherpunk" movement, there have been waves of Internet currency experiments. This "coin-minting movement" is full of tragedy for idealists. The birth of digital currency is like a relay race. None of the key technologies such as asymmetric encryption, peer-to-peer technology, and hash cash were invented by Satoshi Nakamoto, and he stood on the shoulders of his predecessors to create Bitcoin. This episode is a masterstroke.
When generating the genesis block, according to the rules he set, Satoshi Nakamoto received a reward of 50 Bitcoins, which was the earliest 50 Bitcoins. Starting from the genesis block, new data blocks are added to the Bitcoin ledger every 10 minutes, and new Bitcoins are issued out of thin air. Bitcoin’s decentralized network began to function, expanding to what is now a global network of tens of thousands of nodes.
In 2010, Satoshi Nakamoto gradually faded away and handed the project over to other members of the Bitcoin community. Satoshi Nakamoto is believed to hold approximately one million Bitcoins. These Bitcoins were worth over a billion dollars at the end of 2013 and are now worth over $26.5 billion. According to data released by the "Forbes 2023 China Rich List", Satoshi Nakamoto can use this million bitcoins to overtake Jack Ma to rank ninth, second only to NetEase founder Ding Lei's US$26.7 billion.
Bitcoin and Blockchain——Incomprehensible Love
Bitcoin and blockchain are like wicks entangled in front of Tathagata Buddha. When talking about one, you cannot avoid the other. In the eyes of currency players, there is only “coin”, while in the eyes of technical people, “blockchain is the future”. However, if we trace the origin carefully, the relationship between the two is quite a bit like "chicken lays the egg, and the egg lays the hen".
Back in 2008, Satoshi Nakamoto released a white paper: "Bitcoin: A Peer-to-Peer Electronic Cash System." At that time, there was no concept of blockchain in the world. The system released by Satoshi Nakamoto was called Bitcoin, and Bitcoin was this system. Chain is just a part of the system, a subset of the system.
Later, as Bitcoin became known to more and more people, various copycat systems emerged. In order to abstract all systems into a general concept, a new word was coined by convention - blockchain. In this way, Bitcoin Instead, coins have become a subset of blockchain. Hence the famous statement: Bitcoin is a blockchain, but the blockchain is not Bitcoin.
Almost all blockchain technologies being discussed now can be seen in the Bitcoin white paper, such as: Transactions, Timestamp server, Proof-of-Work, and incentive mechanisms. (Incentive), Reclaiming Disk Space, Simplified Payment Verification, Combining and Spliting Value, Privacy, Calculations, etc.
It can be said that the blockchain is the core and infrastructure of Bitcoin. In the Bitcoin system, "coin" is just the unit of account used in this ledger. The most important thing is not the concept of "coin", but a centerless system. The concept of a storage institution’s “ledger”.
In fact, in the years from January 2009 when Bitcoin was officially launched to 2013, the world was basically in a state of “only talking about Bitcoin and not knowing about blockchain”. It was not until 2014 that, as the Bitcoin operating system demonstrated strong security and reliability around the world, its underlying technology, blockchain, began to become the subject of research by major financial institutions and IT giants.
Later, the blockchain began to separate from Bitcoin and become an independent technical concept. At this time, the blockchain was no longer the blockchain in the eyes of Bitcoin fundamentalists. Now, as everyone can see, blockchain technology has begun to sweep the world with an unstoppable trend, sweeping across all walks of life and becoming a well-known global technology wave.
To sum up, it can be said that the “invention” of Bitcoin has confirmed the feasibility of blockchain technology and made blockchain recognized by the world. However, at the same time, the development of blockchain has far exceeded the scope of Bitcoin. . To sum it up in one sentence: the emergence of Bitcoin kicked off the blockchain era, just as the invention of the Watt steam engine kicked off the first industrial revolution.
The logic behind Bitcoin’s 10 million-fold rise
Bitcoin, the product of a currency experiment initiated by technology geeks, has skyrocketed since its birth, rising from a price of less than one cent a cent to a maximum of more than 60,000 US dollars. In just a few years, the price exceeded 10 million. Double the increase! What is the concept? In other words, ten years ago you spent one dollar to buy Bitcoin and did nothing, and now you are a multi-millionaire!
So what is the logic behind Bitcoin’s rise? Will it continue to rise in the future?
It can be seen from the nature of Bitcoin that Bitcoin is a peer-to-peer payment system that is independent of any government or central bank. People can make transaction payments on a peer-to-peer basis without going through any financial intermediaries. It can help people achieve almost no Cost-effective cross-border fund transfers make cheaper and faster international settlements possible. The circulation and payment of funds is the core issue in an increasingly globalized era. This is also one of the important reasons why the blockchain technology derived from Bitcoin is so valued at the national level. Solving this problem can create huge amounts of wealth.
From the nature of value, consensus is the greatest value. So far, the number of Bitcoin holding addresses has exceeded 38 million users, and more and more new players are entering the market. These players span national boundaries, nationalities, and religious beliefs. It can be said that a strong consensus has been formed around the world. Do these characteristics make people think of gold? Bitcoin is also called digital gold. So what is the market value of gold now? As of August 2020, the total market value of gold is approximately US$9 trillion. If the market value of Bitcoin were to catch up with gold, the price of each coin would be US$428,000.
From the short-term economic situation, due to the impact of the new crown epidemic, central banks of various countries have once again released water, and traditional finance has been in collapse. More individual and institutional investors have turned their attention to digital assets represented by Bitcoin. Compared with the unlimited super-inflation model of fiat currencies, It seems that the total amount of Bitcoin is limited and the deflationary model is obviously more attractive.
From the perspective of investment institutions, traditional financial institutions represented by Wall Street are now entering the market one after another. According to relevant statistics, if the Bitcoins held by trust funds, listed companies, governments, and digital asset projects are added up, starting in 2020, Wall Street has controlled about half of the current Bitcoin supply.
Looking at the overall development of human society and economy, the ceiling for human beings to create wealth in the material atomic world is becoming more and more obvious. The rise of digital industry (virtual industry) has given people unlimited space. Bitcoin, as the crown jewel of the digital industry, has great value. You can imagine how high the upper limit will be.
Having talked about the positive rise of Bitcoin, let’s turn to the hidden worries behind the carnival. If it encounters suppression, will Bitcoin return to zero?
In fact, the birth vision of Bitcoin has destined it to be difficult to be liked by the "mainstream world". It can be said that the birth of Bitcoin is a kind of rebellion. What is rebelling against is the right to mint money in the real world. What is rebelling against is the unlimited issuance of legal currency to people. "Shearing wool". This is difficult to be accepted by most countries, especially countries with strong legal currency.
The label of a real-world coinage rebel, coupled with the dark growth history of the darknet dollar, means that Bitcoin will periodically be attacked for various reasons.
Of course, now Bitcoin is more concerned by mainstream institutions such as Wall Street for its role in hedging risks, and is purchased by individual investors as a value investment. With the reputation of "digital gold", it can be said that it has been successfully launched.
Although Bitcoin has not yet become truly mainstream and has not shed its high-risk label, it is undeniable that the decentralized trust system represented by it is leading a new wave of asset digitization. It is foreseeable that the development of Bitcoin will still be difficult and difficult in the future, but we are now at the forefront of the era of digital assets. The era of digital wealth has just arrived. We are groping forward. Bitcoin is like a spark, the kindling that starts a prairie fire. Continuing to grow. (Article material source OKX, Xiamen University Database Laboratory)
