Bitcoin to fly
Translated by Joel M.
Edited by Kenneth K.
(This article is the preface for Feng Han’s book, “The Future of Finance”)
Although Bitcoin has only a brief 10+ years of history, it has enough story to its life to write an entire epic.
After 2008, the global financial crisis haunted people exploited by the highly centralized financial giants. An “Occupy Wall Street” protest, filled with indignation, spread around the world. Though momentum was huge, no solution to overcentralization of credit creation was given–seemingly.
However, this movement could have inspired “Satoshi Nakamoto”, an individual or perhaps a team of individuals. Satoshi created a completely decentralized algorithm to generate credit using algorithms to weave the rosey dream of a completely decentralized credit (currency) system. We imagine Bitcoin, this decentralized algorithm, born in some isolated computer room (or a garage, perhaps).
In some senses, the creation of Bitcoin is a throwback to human finance rather than some disruptive innovation.
As we all know, finance is nothing more than something that fulfills two core needs: the creation of credit, and the monetization of the future.
When ancient humans discovered that the efficiency of bartering was extremely low, credit resources naturally became a vehicle for market transactions. These days, we even use “blood” as a metaphor to the function of credit in a market.
The earliest credit resources were “decentralized” because they mostly relied on natural resources. “?” (which means shell) appears in most of Chinese characters related to finance. In the last hundred years, the gold standard has become the global currency standard.
However, since the 1970s, centralized paper money represented by the “US dollar” has been uncoupled from the gold standard. This is the first time in history that we have entered an era where “credit creation” (currency) is completely centralized.
The complex economic and political reasons are not explainable given the length of this preface. However, what impressed me the most was the conversation with Mr. Greenspan, the former chairman of the Federal Reserve in May, 2018, in Washington, DC. I was fortunate to have a rewarding conversation about Bitcoin with him.
On May 24, 2018, I had an in-depth discussion about Bitcoin and future finance with Mr. Greenspan in his Oval Office in Washington, DC
Mr. Greenspan showed me a chart he’d prepared in advance.
Mr. Greenspan prepared the chart in a rigorous manner. The chart clearly showed the hyperinflation of the British and American fiat currencies before and after the end of the gold standard. (Chart provided by Mr. Greenspan)
An article published by Mr. Greenspan in 1967, Gold and Economic Freedom, made it clear that unlimited issuance of fiat currency was essentially a centralized government’s plundering of people’s wealth.
At the end of the discussion, we both agreed that Bitcoin acted as a countermeasure to the lack of the gold standard as the legal currency issuance mechanism in the global free market.
In fact, when Satoshi Nakamoto designed Bitcoin, he obviously imitated the gold standard: limited provision (natural scarcity), work required for mining (POW), decentralized distribution, easy to divide (divisible digits), physically and chemically stable.
Ten years is only a flash in the history of human civilization. However, Bitcoin has rushed into the real capital world from some utopian fantasy world created by some geeks. It has begun to become an inevitable asset type and method to store value for human beings.
I am afraid that Satoshi Nakamoto did not expect that Bitcoin has both the properties of anchoring natural resources to generate credit (Maxwell’s demon mechanism) and monetization of future digital assets, which is particularly sought after by global venture capitalists!
This process is undoubtedly dazzling. Geeks, adventurers, extreme speculators, players in the financial gray area, etc., are performing an absurd human comedy at this stage.
This book is meant to be a record of this wonderful comedy. My only regret is that the book fails to elaborate on the story of East Asia represented by China, which will have to be addressed by other monographs.
In this book, we see Bitcoin, the financial black swan, flying against the backdrop of the dream of human decentralization.
Bitcoin will be impossible to ignore in the sky of humanity’s financial history!