AA Proficient in BTC 3rd Edition Intensive Reading 03

The second and third paragraphs of the “Introduction” chapter provide a brief introduction to Bitcoin (i.e., bitcoin with a lowercase letter) as a unit of currency. The author AA writes this first:

Users can transfer Bitcoin over the network, realizing almost all functions of traditional currencies, including buying and selling goods, remitting to individuals or institutions, and providing credit services. Users can buy and sell Bitcoin on professional cryptocurrency exchanges or exchange it for other currencies. It can be said that Bitcoin is the ideal form of currency in the internet era—it is fast in transaction speed, high in security, and not restricted by national borders.

It can be seen that the author AA mainly discusses the practicality of BTC as a value transfer medium here, without mentioning its ability as a value storage. This actually deviates from the core value proposition that currently supports the consensus on BTC's value.

Of course, considering that this book mainly introduces BTC as a practical currency, the concept of value storage is actually the flip side of practical currency and involves a completely different narrative, which is not suitable to be discussed simultaneously.

The book on mastering Bitcoin is originally technical in nature. A technical perspective only requires a straightforward narrative; the underlying narratives of value storage and currency overissuance are more financial in nature, and there is no need to elaborate on them in such a book.

When it comes to the concept of the blockchain, one can probably understand why Satoshi Nakamoto, in the Bitcoin white paper published in 2008, only provided a positive narrative and completely omitted any negative narrative. One reason may be that the white paper is technology-oriented rather than finance-oriented. However, the absence of such narratives in the white paper does not mean that Satoshi was unaware of them. In fact, in his posts on forums, he passionately advocated for escaping the risks of excessive issuance of centrally managed currencies, stating that the total supply of BTC is capped at 21 million coins, and so on. (For reference, see Liu Jiaolian's “A History of Bitcoin”, Chapter 9, Section 38 “A Better Gold”)

Next, the author AA mentions the so-called professional cryptocurrency exchange, which is actually the centralized exchange (CEX) that everyone in the industry is familiar with today. In the decentralized world, the crucial infrastructure that facilitates the mutual exchange of real-world assets is surprisingly centralized platforms, which contains a certain dark humor and often becomes a focal point of criticism by the staunchest advocates of decentralization. However, historical development has proven that CEX serves as a bridge and buffer between the purely ideal world of decentralization and the real world of centralization, and even as a means to cut off the on-chain flow of data, still aligns with the market choices of the current stage of development.

BTC, as a purely electronic form of currency that is not pegged to any real-world value and is naturally digital native, is extremely unique and has never appeared in human history.

The currency form of BTC here is, first of all, a form of existence. It is first an object, and only then a currency. In other words, it is a natural currency. It is the famous quote by Marx, that gold and silver are not naturally currencies, but currencies are naturally gold and silver (refer to Liu Jiaolian's “A History of Bitcoin”, Chapter 9, Section 36 “The Monetization of Commodities”). After the emergence of BTC, this statement needs to be revised and expanded:

Gold and silver are not naturally atomic currency (physical currency), but atomic currency is naturally gold and silver. Bitcoin is not naturally bit currency (digital currency), but bit currency is naturally Bitcoin.

What is an atom? Hydrogen, helium, lithium, beryllium, boron in the periodic table… What is a Bit? 0 and 1.

All fiat currencies can be divided into two categories: fiat currencies that are backed by gold and fiat currencies that are not backed by gold. All fiat currencies and gold are also subject to the constraints of the Mundell's impossible trinity.

A fiat currency that is pegged to gold is merely a shadow currency of gold, similar to paper gold. It sacrifices an independent monetary policy within the Mundell triangle (the issuance quantity is entirely constrained by gold reserves) in exchange for exchange rate stability with gold and free convertibility.

Fiat currencies that are not backed by gold, which is to say the fiat currencies of almost all countries in the contemporary world, are almost all debt currencies. The so-called debt currency is essentially debt, merely the credit of the borrower. The end game of debt is default, and the end game of debt currency is to go to zero. It has reclaimed the independent monetary policy within the Mundell triangle, allowing relevant authorities (composed of people, which is essentially human nature) to break free from the constraints of gold, regaining independent monetary policy (which can be used to issue currency excessively based on seemingly scientific, rational, and logically correct reasons fabricated according to human nature). Therefore, it must use various means, either overt or covert, to restrict its free convertibility with gold, in order to maintain its relative value against gold! In the long run, no matter how much it is restricted, its value will inevitably trend towards zero relative to gold. (Refer to Liu Jiaolian's “A History of Bitcoin”, Chapter 10, Section 41 “The Great Gold Heist”)

Therefore, the essence of all debt currencies is the capital pool. Starting the pool, controlling the pool, crashing the pool, and exploding the pool are the life cycles of every pool. The only difference is the length of the life cycle. Excellent traders have strong control capabilities and the restraint to avoid impulsively crashing the pool and running away, instead choosing to harvest in the long term. Such a pool will become an excellent pool. Such traders will also become excellent traders like the Federal Reserve.

The electronic payments and online payments that each of us uses every day are merely the electronic and digital forms of fiat currency. The electronic and digital fiat currency is still fiat currency.

If we say that BTC is the ideal internet currency, as AA wrote in the book, it is because it has fast transfers, high security, and transcends borders. Apart from the visible advantage it has over the slow and cumbersome cross-border remittances in terms of being borderless, in payment functions such as transfer speed and transaction security, BTC not only does not have a perceptible advantage over internet online payments and electronic payments for ordinary users, but is even slower, has a higher threshold, and is more prone to errors than the latter.

In the view of the teaching chain, BTC, as a globally accepted payment currency, can currently only be described as a vision for the future. This vision is brought up because it is the surface of the story. However, the back side of the story is more important, but it requires each reader to turn it over, look, think, and reflect.

The story of BTC is like that mirror called the Mirror of Wind and Moon; on the front, it shows a captivating beauty, but on the back, it reveals a mountain of white bones.

It is humanity's first attempt to recreate another form of gold using a completely different material (Bit, rather than atoms) — that is, to deprive humanity of control over monetary policy, replacing it with a fixed, public algorithm to strictly constrain currency issuance (using powerful, distributed computing power to ensure the effectiveness and inviolability of this constraint); at the same time, maintaining its complete freedom of exchange with gold (and all other forms of currency) without imposing any internal restrictions; of course, according to the Mundell triangle, it cannot maintain stable exchange rates relative to gold and other forms of currency, either depreciating or appreciating.

When you truly understand all of this, you will really comprehend that saying: there are only two types of coins in the cryptocurrency market, one is called Bitcoin, and the other is called non-Bitcoin, commonly known as altcoins. All other coins that are not Bitcoin are altcoins. The ultimate logic of altcoin economics, no matter how it is written in the white paper, how it claims, or how it is promoted, is essentially destined to revert to the same funding logic as fiat currency. Without exception.