This is the full text of Mai Gang's speech at the Entrepreneurship Training Camp in 2014:
The most essential thing in economics is money.
Before the financial crisis, I read a book about a famous physicist. He said that we in science and engineering, such as studying physics, measure length, width, weight, and time, which are constants. You economists study units that are variables.
For example: "How much is a McDonald's worth?"
You have to ask: Is it in US dollars, RMB, or Japanese yen?
You have to ask: Is it US dollars from 1958 or US dollars from 1985?
After reading this, I had an epiphany that economic research studies changing things. I studied economics as an undergraduate and should look back at the most essential changing thing in this discipline - money.
Later, some books, like "Currency Wars", drew public attention to money. I had a relatively comprehensive understanding of money, so when Bitcoin appeared, I could only say one word: "Wow!"
Bitcoin Captures the Essence of Money
What is Bitcoin? Let me explain in two sentences.
First, Bitcoin is a distributed algorithm created by mathematicians, geeks, and network scientists to simulate the perfect attributes of money;
Second, these attributes are maintained by the powerful computing power of distributed computers.
That's what Bitcoin is. All discussions, doubts, questions, and innovations about Bitcoin return to this framework. Therefore, Bitcoin is not a conspiracy, but an open strategy. Bitcoin does things very clearly. All of Bitcoin's data can be found online at any time by anyone.
Bitcoin captures the essence of money, and what it does is hope to simulate perfect money.
Why Can Bitcoin Simulate Perfect Money?
(I) Bitcoin's Monetary Characteristics Surpass Precious Metals
The history of money is five thousand years old, while national history is three thousand years. Money is a concept that appeared far earlier than nations. China's currency has gone through various choices, from feathers, shells, stones, livestock, and even women serving as currency in some countries, until the emergence of precious metal currency.
Precious metals cannot be easily counterfeited, or counterfeiting is extremely costly. They have low transaction costs, are relatively convenient to store, can be divided, and have a soft texture. These attributes are reflected in precious metals. Therefore, precious metals were used as circulating currency. Gold trading still has costs, and there are risks in exchange and payment between different locations. This is something many people are unaware of.
Bitcoin has a limited total amount, is distributed, and can be participated in by anyone with a computer, making it very equal. Bitcoin is a commodity simulated by mathematical methods, possessing all the characteristics of precious metals and surpassing them in all properties.
Moreover, the Bitcoin network can continue to be upgraded, so it won't face the problem of gold becoming obsolete or insufficient. For digital currency, there's no issue of not being enough.
(II) Bitcoin is Highly Improbable to be Counterfeited
First, computing power is immensely vast and controlled by various people worldwide. It's difficult for one person to simultaneously control so much manpower and computing power.
Second, even if someone could control such computing power, from an economic and logical perspective, they should control the network rather than attack it, because their assets are in Bitcoin, and they won't destroy their own assets. This is a probability and logical issue.
Third, Bitcoin has low transaction costs. The total number of Bitcoins will be permanently limited to 21 million, and can currently be divided to 8 decimal places (0.00000001 BTC is the current smallest unit), which is Bitcoin's existing calculation system.
(III) Bitcoin Network is an Advanced Clearing and Payment System
The Bitcoin network is a fully automated clearing and payment system that no one manages, and Bitcoin is the circulating unit produced by this network. This network is a natural clearing and payment system that doesn't need management. Bitcoin's use value is reflected in its clearing network.
Western Union, with over fifty years of history, makes billions in profit annually, especially in relatively underdeveloped countries. It helps customers transfer money, with a delivery time of one to two weeks and fees of 5 to 8 percent. What a profitable and wonderful business.
Bitcoin payments are basically settled in a few minutes to ten-odd minutes, with extremely low handling fees. Companies like VISA, representing the existing financial circulation and commercial banking technology architecture, are surpassed by Bitcoin's new technological architecture and foundation.
This is Bitcoin's advanced nature in circulation networks and commercial bank remittance functions.
Decentralization Guarantees Bitcoin's Security and Freedom
Human society has three forms of currency: first, the precious metal currency system, and second, credit currency supported by government credit. In the credit currency era, we commonly see issues like inflation, excessive money printing, and currency wars.
The monetary system we are in today is represented by the US dollar, with dollar hegemony flooding the global market, where people worldwide, especially the poor Chinese, are working for the United States.
Why do American jeans that cost $10 or $20 sell for 100 yuan in China? All of this is because the US dollar is a global currency, using its hegemony to achieve this.
However, the emergence of Bitcoin has led humanity into a third monetary era. When I say the third era, I don't mean replacing the previous two. Just as the internet appeared without replacing fax machines and telephones, they coexist. This is decentralization - a virtual currency built on mathematical concepts, where decentralization guarantees Bitcoin's security and freedom.
Bitcoin is Supported by Credit and Will Exist for a Certain Period
Money needs credit to support it. A country's credit, government, state machinery, military, and laws can support credit currency. So, what supports Bitcoin?
It's simple. There are many forms of credit in the world. Some swear "I'll love you forever"; some promise "I'll mortgage all my assets"; some say "I was a good student before"... These are all credits. What is Bitcoin's credit? It's mathematics and probability. If you believe in math and this probability, it exists.
I believe Bitcoin will exist for a certain period in the field of circulating currency. In some economic activities, especially those related to networks, internationalization, and virtual realms, a form of circulation like Bitcoin will exist because it is unrestricted.
Bitcoin is a Tool for Multi-Party Negotiation
Let me ask a question: After Bitcoin came out, which country was most afraid of it? - The United States.
This explains why the EU was the first region to support Bitcoin, because when the boss is hit, the second-in-command benefits. This is a very subtle and interesting negotiation. The California Congress has declared Bitcoin a legal currency, though it still needs to go through a House vote. Bitcoin is a significant innovation in the financial field, and it will certainly bring a series of new regulatory actions that we must study, which is the US government's attitude. The Chinese government's attitude is similar, though new things often bring new challenges.
I especially want to emphasize that the Chinese government and people must understand the variability and far-sightedness of US monetary strategy and the complexity of global multi-party negotiations. Bitcoin is not a celebration of libertarians or anarchists, but a tool for multi-party negotiation.
Everyone Should Pay Attention to and Learn About Bitcoin
I am not an anarchist, nor am I advocating that we use Bitcoin today and abandon the RMB. But I can tell everyone that in the future, in as short as 10 years or as long as 30 years, the United States will likely reconstruct a global monetary system, and in this system, the US will probably link the dollar to a new series of assets, which includes virtual currencies represented by Bitcoin.
Before achieving this, the US only needs to do one thing: gain discourse power in the Bitcoin domain, which could be through computing power, reserve volume, or pricing rights. Why does the US have an advantage in doing this? Because the US has Wall Street, which is the elite of global elites.
I have an imaginary 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 do only Americans and Europeans have Bitcoin, but not Chinese?"
Father: "Sorry, my dear. When I was young, I still had money, but at that time, money in China could buy love, but couldn't buy Bitcoin."
Child: "Dad, where can I buy Bitcoin?"
Father: "If we continue making socks and shoes for another 30 years, we might be able to exchange them for Bitcoin with Americans."
I hope everyone, including government institutions, realizes the greatness and complexity of this Bitcoin game, which truly relates to our descendants. Americans used the dollar's hegemony in the last century to obtain the right to mint money, making the whole world work for them. If Americans gain discourse power in Bitcoin over the next few decades, they will continue to make the world work for them.
I hope that Chinese entrepreneurs, Chinese enterprises, and ordinary Chinese people can gain discourse power in the Bitcoin domain, and I also hope that everyone will pay attention to and learn about Bitcoin.
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