Overview

　　”Bitcoin”, “crypto-currencies”, and “blockchain” have become hot topics in the media and have attracted increasing interest in the academic field (such as computer science and financial economics). However, from a social perspective, crypto-currencies are indeed difficult to make a definitive conclusion. In my opinion, crypto-currencies and blockchain are indeed an important object of sociological research and thinking, but they are not money themselves. In this article, I mainly want to prove that Bitcoin should not be money in economic terms, but a means to solve double spending and personal privacy issues in the digital age.

　　Bitcoin and Social Relations

　　Bitcoin and other ‘crypto-assets’ are a proper social-technical combination, but not because they are the best currency. On the contrary, their purpose is to bring people together directly by completely demediating institutions, which are then replaced by blockchain technology. By ‘complete demediation’, I mean that Bitcoin and other crypto-assets allow for pure peer-to-peer property transfers without the need for commitments from third parties or institutions. Its impact is indeed immense. Generally speaking, one of the key roles of the state is to enforce property rights. The purpose of state enforcement is to reduce the cost of self-enforcement, thereby increasing asset value and stimulating economic growth and prosperity. [1] Therefore, the interpretation that Bitcoin and other crypto-currencies simply convert the long-accumulated trust in fiat currency into ‘machine code’ while cutting off all connections with society is one-sided. From my perspective, Bitcoin actually promotes social relations more directly through p2p network (peer-to-peer interaction), although it is regulated through computer technology. The most influential people in the Bitcoin project publicly speculate that crypto-currencies are more like collectibles or commodities rather than money. In my view, the main driving force behind Bitcoin’s development is non-economic, such as preventing speculators from taking advantage of the困扰 caused by double spending, and the emphasis on personal privacy protection by users in the digital age.

　　Is Bitcoin or other cryptocurrencies as a currency a success or a failure?

　　I always think that blockchain technology is just a means to achieve prosperity. I want to introduce what Bitcoin and blockchain are first, as well as how they build interaction between societies. Although there are many introduction articles on the internet, I want to share with everyone from the perspective of the origin of Bitcoin.

　　Since the computer age, the idea of creating a digital form of currency is actually very interesting but raises many questions. Have you ever thought about how to prevent something like money, when it exists in a computerized or coded form, from being counterfeited? How can people prove who owns the virtual currency? How can such an amount of money be safely stored and transferred between computer devices or mobile terminals? How can anonymity be maintained in a system that always records digital traces?

　　The true origin of cryptocurrencies like Bitcoin is not the beginning of the fight against the centralized monopoly of third-party institutions or governments, or the冲击 against the status of central banks. On the contrary, it started with the search for answers to the questions listed above: how to solve the underlying financial problems within the existing virtual space. At the same time, Bitcoin’s discussion of the basic concepts of money (as a medium of exchange, means of storage, and unit of account, liquidity, durability, etc.) in the entire white paper is not mature. In fact, many experts, scholars, and bigwigs have proven that technologies (cryptocurrency and blockchain technology) with revolutionary development potential in future societies had quite humble beginnings, starting with a group of young scholars (although none of them were economists) trying to solve a series of intellectual puzzles.

　　As early as 1982, when China did not have the internet as we know it today, the 2nd annual CRYPTO conference was held in California. The participants were mainly contemporary computer scientists and mathematicians. David Chaum, who graduated from the University of California, Berkeley with a Master’s degree in Computer Science and an MBA at the age of 27, presented his abstract titled ‘Blind Signatures for Untraceable Payments’【2】. Those interested can take a look. The paper roughly describes how encryption technology can be applied theoretically to create a secure, anonymous digital cash. This is probably the earliest reference to cryptocurrency that I know of. The innovation of public and private keys that we now speak of originated from here. A known public key plus a private key retained only by its owner. The public key will act as an identifier or digital alias, similar to a bank account; the private key will be used as a ‘blind’ digital signature to prove that the public key actually belongs to the relevant party while maintaining the anonymity of the agent.

　　David Chaum was a very forward-thinking person, and he mentioned this in his paper: ‘The automation of the way we pay for goods and services is already underway, as can be seen by the variety and growth of electronic banking services available to consumers. The ultimate structure of the new electronic payment system may have a substantial impact on personal privacy.’

　　It means that the development is both fast and good now, but the ultimate structure of the existing payment system may have a significant impact on user privacy. I won’t mention the story of Facebook leaking user privacy, but the increasing number of harassment calls even know your position, where you are, phone number, name. The property loss caused by the leakage of personal privacy, malicious programs, etc., is terrifying when thought about. On September 11, 2018, the China Consumers Association released the ‘APP Personal Information Leakage Situation’ in Beijing, and 85.2% of the respondents had experienced personal information leakage【3】.

　　David Chaum founded a private company called DigiCash in 1989, with the aim of protecting online transactions through encrypted, anonymous ‘ecash’, in collaboration with several banks including the United States Commercial Bank and the German Deutsche Bank. However, the company filed for bankruptcy protection in 2002, having failed to secure terminal user and financial support. The reason for the bankruptcy was actually very simple: ‘Nobody gives a shit about privacy’【4】; at that time, there was no one who cared about personal privacy.

　　Throughout the 1980s and 1990s, the CRYPTO conference continued to expand to Europe and Asia, attracting ambitious young scholars who, based on David Chaum’s ideas (and other topics), proposed alternative digital cash protocols. For example, at the 1983 CRYPTO conference, three Israeli computer scientists introduced the concept of the ‘electronic wallet’, which aimed to store ‘unforgeable amounts of digital money’ and to enable non-forgeable transactions between similar wallets using ‘public key cryptography’ (even after 1984). To this day, cryptocurrencies are still stored in what is commonly referred to as ‘wallets’, and they operate based on them.

　　Soon, a major technical obstacle began to hinder the development of the theory at that time: the so-called ‘double spending’ problem. How to prevent anyone from copying an electronic coin and using it in different places or with different traders? In 1988, Chaum, along with Amos Fiat and Moni Naor, returned to the CRYPTO conference and proposed a solution to this problem. By using the additional encryption method of ‘zero-knowledge proof’, this series of problems was solved. ‘Zero-knowledge proof’ can allow banks to track ‘repeat spenders’ (also known as Alice), which may be why the name Alice appears so frequently in blockchain books. In this way, banks can provide conclusive evidence that Alice has reused her moneylotteryClick to enter. [5]

　　To put it another way, the significance of zero-knowledge proof lies in the fact that you can prove the authenticity of certain facts without knowing the truth. Let’s take Alice as an example! Alice and Bob are playing the ‘Open Sesame’ game. Alice knows a spell that can open the door, but she doesn’t want to tell Bob. Bob starts to suspect that Alice is bluffing. So the question is, how can you confirm that Alice knows the spell without Bob knowing it? Bob thought of a method. This door is in a cave with two paths, L and R, leading to the same destination, with the door hidden in the middle. First, let Alice choose either L or R to enter the cave at random, and Bob doesn’t know which path Alice chooses. Then Bob shouts into the cave, telling Alice which path to take out. If she really knows the magic word, she will follow Bob’s instructions all the way because she can open the door and go around. If she doesn’t know the magic word, she still has a 50% chance to leave the path you choose. However, if Bob repeats this task over and over again, the probability that she will follow Bob’s chosen exit by chance will quickly approach 0. Therefore, you can draw the conclusion that she knows the magic word but doesn’t know what it is.

　　Please forgive my poor drawing skills

　　Following such a logic, it is possible to know whether ‘lottery and How to find it’ has been reused without knowing anything about Alice.

　　Subsequently, at the 1989 CYPTO conference, Tatsuaki Okamoto from the Japanese telecommunications company and Ohta Kazuo proposed improvements to this zero-knowledge proof and proposed divisible electronic currency. At the 1993 CYPTO, Brand demonstrated how cryptographic protocols can be used by issuing banks to prevent the duplication of digital coins, rather than detecting them after the fact【6】. These innovations are incremental, based on existing literature, solving technical problems, just like the ‘normal science’ proposed by Nobel Prize winner Kuhn【7】.

　　So far, the use of cryptography has effectively allowed Online casino and How to find it to be safely held and anonymously transferred between parties, but the method to solve the double-spending problem still depends on some trusted third parties.

　　For many of us, the story ends here – because we usually trust third parties. We trust the government, central banks, WeChat, Alipay, regulatory authorities, and laws to ensure the soundness of economic transactions and property rights. So why do we need to strip away such third parties and hand control over to decentralized algorithms?

　　Differences in national systems, social structures, and ideological and religious beliefs between people can lead some to become supporters of decentralization. I greatly respect these people’s contributions, and the Cypherpunks team actively participated in the creation of Bitcoin. Cypherpunks is an influential group consisting of thinkers, technical experts, and software developers who continue to study the challenges brought by the double-spending problem. Cypherpunks believe that the government should not spy on people’s affairs; protecting private conversations and exchanges is a basic right, and these rights may need to be protected by technology rather than law.

　　Technological innovation often creates new political realities. Under extreme ideologies, some members of Cypherpunks advocate for a state of anarchy, where governments and institutions are replaced by technology that can ensure personal privacy, freedom, property security, and equality.

　　Privacy is not secrecy

　　Cypherpunks believe that privacy is something a person does not want the whole world to know, while secrecy is something a person does not want anyone to know. Privacy is the power to choose to show oneself to the world. What people pursue is privacy, not secrecy.

　　At the end of the 1990s, Nick Szabo proposed the predecessor of the Bitcoin system, Bit gold. Nick Szabo believed that even during periods of political stability, owners often feel the need (or are forced) to purchase property insurance to confirm ownership. The idea of executing property security records through copying databases sowed the seeds for future blockchain technology. Blockchain is a decentralized, distributed, and public digital distributed ledger that records every transaction, replicating it linearly and in chronological order on many computers, so that the records cannot be traced back or deleted.

　　In theory, this idea is feasible. In practice, it is not easy to ensure that the entries in the shared distributed ledger are valid. The Byzantine General’s Problem is a typical example of this. The Byzantine General’s Problem can be simply understood as the problem of how mutually distrustful nodes can reach a consensus, which will not be elaborated here. But with appropriate incentives and the existence of unforgeable messages based on cryptography, consensus can be reliably achieved.

　　For Bit Gold, new entries must be confirmed in a way that can tolerate the Byzantine General’s Problem, and the chosen solution is called proof of work (PoW).

　　Proof of work was initially proposed as a solution to the increasingly serious spam problem. At the 1992 CRYPTO conference, Dwork and Naor (who had collaborated with David Chaum on zero-knowledge proofs) proposed an idea to prevent spam by increasing costs without disrupting the normal use of email. The main idea is that the email system requires the sender to calculate some relatively expensive but not difficult problems to obtain the right to send【8】. In summary, the sender of an email must provide valid evidence that they have solved the problem in order to be qualified to send an email. This proof function may take a few seconds or minutes to solve, which will not be prohibited in most cases, but will bring huge costs to the spam senders.

　　Szabo adopted this approach to address the issue of the authenticity of the replicated database. To conceptually verify this idea, Szabo designed a mechanism to transfer ownership security equivalently to a virtual good he called Bit Gold.

　　Bit gold has never been implemented, but it has completed this cycle—a shared database and a proof-of-work scheme. So far, all the components of Bitcoin are ready. I once saw this sentence online: Bitcoin = blockchain. But that is completely wrong; what lies behind Bitcoin is far more than just blockchain technology, including encryption technology (as early as the German Enigma used during World War II), p2p network, and PoW mechanism.

　　What is needed now is just a suitable opportunity to reveal itself on the world stage.

　　However, the entire design principle and logic have not been analyzed from the perspective of economics, finance, or sociology. After all, Cypherpunks are not economistsonline casino methodJoin us. Although everyone knows that the government uses fiat currency as a weapon against inflation, there is little attention paid to actual economics or monetary policy. Therefore, a decentralized cryptocurrency that protects user privacy must be deflationary (to retain its value, but also as a political statement, with a fixed total), but beyond that, there are few other considerations. The ideological and technical aspects of cryptocurrency are already in place, but the rules and theories on how to make these cryptocurrencies function like money have been ignored by people.

　　The birth of Bitcoin
entry method lottery entry method，We need you
　　In 2008, amidst the global financial crisis, most parts of the world entered a period of economic recession. On October 31, 2008, a technical paper titled ‘Bitcoin: A Peer-to-Peer Electronic Cash System’—signed by Satoshi Nakamoto—was published on Cypherpunks. Who is Satoshi Nakamoto remains a mystery to this day. In the original text of the white paper, Nakamoto mentioned: ‘A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network … using proof-of-work to record a public history of transactions.’ Bitcoin is ‘based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.’ In Nakamoto’s proposal, there is no mention of the monetary value of Bitcoin, nor of how it might be used as a unit of account or store of value. [9]

　　On January 3, 2009, the first Bitcoin’s first work proof of concept was solved. At the same time, the global financial crisis was deepening. Indeed, the timing of Bitcoin’s issuance was exactly when people’s trust in financial institutions was gradually declining. There might be some speculation involved. Personally, I think Bitcoin firmly seized the opportunity when a third-party institution was not trusted from the very beginning. The first Bitcoin transaction was when Satoshi Nakamoto sent 10 bitcoins to Hal Finney.

　　Bitcoin’s monetary policy

　　Friends who are interested can get to know what China’s monetary policy has experienced in advance【10】. However, what about Bitcoin’s monetary policy? In the initial Bitcoin white paper, none of these were elaborated. In the traditional sense, money must be easily standardized, making it easy to determine its value, and it must be widely accepted. Money can be used for change and is convenient to carry. Finally, money must be durable, and it is definitely very difficult to forge.

　　在2008年11月发给密码学朋克们的一封电子邮件中，中本聪声称比特币的主要特性如下：【11】

　　In an email sent to crypto punkers in November 2008, Satoshi Nakamoto claimed that the main characteristics of Bitcoin are as follows: [11]

　　The main properties: Double-spending is prevented with a peer-to-peer network. No mint or other trusted parties. Participants can be anonymous. New coins are generated from Hashcash style proof-of-work. The proof-of-work for new coin generation also powers the network to prevent double-spending.

　　The actual ‘monetary policy’ of the Bitcoin system seems quite arbitrary. After the first version of the Bitcoin software was released, Satoshi Nakamoto posted that:

　　The total circulation will reach 21,000,000 coins. It will be distributed during the construction of network nodes, with the amount halved every 4 years. First 4 years: 10.5 million coins in the next 4 years: 5.25 million coins in the next 4 years: 2.625 million coins in the next 4 years: 1,312,500 coins etc… After it is exhausted, the system can support transaction fees as needed. It is based on open market competition, and there may always be nodes willing to process transactions for free.

　　That is to say, Bitcoin is expected to be mined out at some point in 2140. Although Bitcoin does not mention any economics, this idea has become popular. By early 2018, the total value of all Bitcoin exceeded 185 billion US dollars, and the value of Bitcoin circulating within the system daily exceeded 2 billion US dollars. In other words, this could be due to the lack of a trustworthy third party, and the value of 2 billion US dollars would be transferred every day.

　　So is Bitcoin still money? The answer is no. But do you want to have tens of billions of securities and derivatives, legal contracts, and other products like Bitcoin circulating every day? If the above story tells us anything, it is that what people do with Bitcoin is not as important as how they do it and why they do it.

　　Let’s take a few more examples: When Nick Szabo talked about his own proposal of lottery and How to find it, he said: ‘Bit Gold acts more like collector’s items than like gold.’ [12]

　　In response to an online forum post titled ‘Bitcoin is Most Like Common Stock,’ Satoshi Nakamoto personally attended his last public event and replied: ‘Bitcoins have no dividend or potential future dividend, therefore not like a stock. More like a collectible or commodity.’ ‘Bitcoin has no dividend, nor does it have any potential future dividend, so it is not like a stock.’ Those who seriously think and develop cryptocurrencies rarely use traditional monetary terms to talk about it, but regard it as a virtual collectible or commodity. Therefore, it is not surprising that Bitcoin is more like these virtual commodities or collectibles than money.

　　Where is the value of Bitcoin?

　　Bitcoin is indeed valuable in the market, although it has a certain speculative nature to some extent. Bitcoin requires a certain amount of resources (electricity, depreciation, etc.) in mining and implementing the PoW mechanism mathematically. Although the original intention of PoW is to suppress the enthusiasm of spammers, it also motivates participants and protects the effectiveness of the replicated database, ensuring the authenticity of property ownership and its transfer records. Therefore, those who bear the cost of accounting can only be willing to do so if they receive compensation. The economic value of the Bitcoin received by miners or mining farms must cover the entire cost of the mining system. In other words, the economic value of Bitcoin comes from the cost of obtaining it by a trusted third party, which is both cost and value. In my view, it is more like a virtual commodity or collectible and cannot replace fiat currency.
sports betting method and The most fun game
　　Cited literature

　　【1】http://www.360doc.com/content/17/0109/13/37923007_621277245.shtml

　　【2】http://www.cs.jhu.edu/~sdoshi/crypto/papers/chaum-c82.pdf

　　【3】https://baike.baidu.com/item/个人信息泄露/15600827?fr=aladdin

　　【4】Don Tapscott, Alex Tapscott, BlockChain Revolution

　　【5】Chaum, D., Fiat, A., & Naor, M. (1988, August). Untraceable electronic cash. In Conference on the Theory and Application of Cryptography (pp. 319-327).

　　【6】http://www.hit.bme.hu/~buttyan/courses/BMEVIHI5316/Brands.Untraceable_off-line_cash.1993.pdf

　　【7】https://en.wikipedia.org/wiki/Normal_science

　　【8】http://www.wisdom.weizmann.ac.il/~/naor/PAPERS/pvp.pdf

　　【9】https://bitcoin.org/bitcoin.pdf

　　【10】https://baijiahao.baidu.com/s?id=1611353570447152769&wfr=spider&for=pc

　　【11】https://satoshi.nakamotoinstitute.org/emails/cryptography/1/#selection-31.0-14.27

　　【12】Szabo, N. (1998b). Bit gold. Website/Blog. http://c2.com:80/cgi/wiki?BitGold

　　Source: Baidu Tieba