Mike Ma in 2014 on Bitcoin: A Simulated Perfect Currency, Bitcoin Will Become the New Battlefield of Great Power Games

Speaker: Maigang, Founder of Startup Factory

Original Text Compilation: Xu An/Black Horse

This is the full text of Maigang's speech at the 2014 Startup Bootcamp:

The most essential thing in economics is currency.

Before the financial crisis, I read a book about a famous physicist. He said that we, as STEM people, studying physical quantities like length, width, weight, and time, all of those are constants. Those studying economics, on the other hand, deal with variables.

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

You have to ask if it's in dollars, yuan, or yen?

You have to ask if it's a 1958 dollar or a 1985 dollar?

After reading that, I had a sudden realization. Economics researches the ever-changing things. I majored in economics during my undergraduate studies, so I should revisit the most fundamental thing that has always been changing within this discipline—currency.

Then there were some books, like "Currency Wars," that drew nationwide attention 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 Currency

What is Bitcoin? Let's make it clear in two sentences.

1. Bitcoin is the perfect currency attributes simulated by mathematicians, geeks, and computer scientists using a distributed algorithm;

2. These attributes are maintained by the computing power of a tremendously strong distributed computer network.

That's what Bitcoin is. All discussions, doubts, questioning, and innovations about Bitcoin go back to this framework. Therefore, Bitcoin is not a conspiracy but a well-thought-out plan. All of Bitcoin's data can be found online at any time by anyone.

Bitcoin captures the essence of currency, aiming to simulate the perfect currency.

Why Can Bitcoin Simulate the Perfect Currency?

(One) Bitcoin's Currency Characteristics Surpass Precious Metals

Money has a history of five thousand years, while the history of nations is three thousand years. Money is a concept that appeared long before nations. Therefore, China's currency has gone through various choices, from feathers, shells, stones, livestock, and even women as some countries' currencies, until the emergence of precious metal currency.

Precious metals cannot be counterfeited, or the cost of counterfeiting is extremely high, transaction costs are low, storage is relatively convenient, they can be divided, and their texture is relatively soft, all of which are properties reflected in precious metals. Therefore, precious metals are used as a means of currency circulation. Gold trading still incurs costs, and there are risks involved in exchanging from one place to another in terms of delivery and redemption. This is something that many people are not aware of.

Bitcoin has a limited total supply, is widely distributed, and as long as you have a computer, anyone can participate, making it very equitable. Bitcoin is a commodity simulated through mathematical methods, possessing all these characteristics of precious metals and surpassing past precious metals in all characteristic properties.

Furthermore, the Bitcoin network can continue to be upgraded, so there will not be a situation where gold exits the historical stage as it is no longer sufficient. For digital currency, the issue of scarcity does not exist.

(II) The Unlikelihood of Bitcoin Being Counterfeited

First, the computing power is immense, distributed among various people around the world, making it very difficult for one person to control so much computing power at the same time.

Second, even if someone had the opportunity to control this computing power, from an economic and logical perspective, they should control the network rather than attack it because their wealth is in Bitcoin, and they would not destroy their own wealth. Therefore, this is a probability issue and a logical problem.

Third, Bitcoin has low transaction costs, which is a particularly important feature. The total number of Bitcoins will be permanently capped at 21 million, and Bitcoin can currently be divided into units up to eight decimal places (0.00000001 BTC is the smallest unit). This is Bitcoin's existing computational system.

(III) The Bitcoin Network is an Advanced Settlement Payment System

The Bitcoin network is an automated settlement payment system that operates without any central management. Bitcoin is the circulating unit generated by this network. This network is a naturally occurring settlement payment system that does not require management, and Bitcoin's utility is reflected in it being a settlement network.

Western Union, an American international remittance company with over 150 years of history, earns billions of US dollars in profit each year, especially widely used in some relatively underdeveloped countries. It helps customers remit funds, with a processing time of one to two weeks and charges ranging from 5 to 8 points. What a lucrative and wonderful business this is.

On the other hand, Bitcoin payments are confirmed in just a few minutes, and fees are very low. So, companies like VISA, representing the technology infrastructure and foundation used by our existing financial circulation system and commercial banking system in the past, have been surpassed by Bitcoin's new technology infrastructure and foundation.

So, this is the advanced feature of Bitcoin on the circulation network and in the commercial bank's exchange function.

Decentralization is the Guarantee of Bitcoin's Security and Freedom

Human society has three forms of currency: one is a currency system represented by the precious metal gold, and the other is a credit currency backed by government credit. In the era of credit currency, the common problems we see are inflation, currency overissuance, and currency wars.

The monetary system we are in today is represented by the US dollar, with the US dollar as the hegemony, and the US dollar flooding the world. People all over the world, especially hardworking Chinese people, are working for the United States.

Why is a pair of American jeans $10 or $20 but sells for $100 in China? All of this is because the US dollar is the global reserve currency, and the US dollar has achieved this day through its hegemony.

However, the emergence of Bitcoin has brought humanity into the third era of currency. When I say the third era, I do not mean to replace the first two. It's like the Internet appeared, not to 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 Relies on Credit Support and Will Exist for a Certain Period of Time

Currency needs credit support, and a country's credit, national sovereignty, national machinery, army, and law can support a credit currency. So, what supports Bitcoin?

It's simple; there is a lot of trust in the world. Someone swears, "I will love you forever"; someone promises, "I mortgage all my property"; I guarantee, "I was a good student in the past"... these are all trusts. What is the credit of Bitcoin? It is mathematics and probability. If you trust mathematics and trust this probability, then it exists.

I think that Bitcoin will exist for a certain period in the field of circulating currency. In certain economic activities, especially those related to the internet, internationalization, and virtual activities, there will be a form of circulation like Bitcoin because it is unrestricted.

Bitcoin is a Tool for Multi-Party Games

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

This explains why the European Union was the first to come out in support of Bitcoin because when the top dog is hit, the second in line finds it enjoyable. So, this is a very subtle and interesting game. The California State Assembly has already declared Bitcoin as legal tender, of course, it still needs to go through the House vote. Bitcoin is a significant innovation in the financial sector, and of course, it will bring a series of new regulatory actions. We must definitely study this; this is the attitude of the US government. The Chinese government actually has a similar attitude, but new things often bring new challenges.

I specifically want to talk about how the Chinese government and people must understand the variability and farsightedness of the U.S. monetary strategy, as well as the complexity of the global multi-country game. Bitcoin is not a celebration of liberalism or anarchism, but a tool for multi-party games.

Everyone Should Pay Attention to and Learn About Bitcoin

I am not an anarchist, nor am I advocating that we should use Bitcoin today and not the Renminbi. But I can tell everyone that in the near future, whether it's within 10 years or 30 years, the United States will reconstruct a global monetary system. In this global monetary system, the United States is very likely to peg the dollar to a new set of assets, including virtual currencies represented by Bitcoin.

Before achieving this, the United States only needs to do one thing, which is to gain influence in the field of Bitcoin. This influence may be in terms of computing power, reserves, or pricing power. Why does the United States have an advantage in doing this? Because the U.S. has Wall Street, which is the elite of the global elite.

I have a hypothetical story about Bitcoin. If Bitcoin becomes a global asset in 30 years, there might be a conversation between a child and their father like this:

Child: "Why are all Bitcoin holders Americans and Europeans, but not Chinese?"

Father: "Sweetheart, I'm sorry. When Dad was young, he still had money, but at that time, money in China could buy love, but not Bitcoin."

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

Father: "If we keep making socks and shoes for another 30 years, we'll be able to exchange Bitcoin with the Americans."

I hope that everyone, including government institutions, should realize the greatness and complexity of this Bitcoin game, as it truly affects our future generations. In the last century, Americans used the hegemony of the dollar to obtain the right to mint the dollar, making the whole world work for them. If Americans gain the language power of Bitcoin for another few decades, they will continue to make the whole world work for them.

I hope that Chinese entrepreneurs, Chinese companies, and ordinary Chinese people can gain influence in the field of Bitcoin. I also hope that everyone will pay attention to and learn about Bitcoin.

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