If anyone says bitcoin is a scam, show them this article
Original title: "Debunking Common Bitcoin Myths"
Original source: ARK Invest
Original compilation: 0x88
Goldman Sachs Recently on Bitcoin Where Bitcoin Stands, ARK reinterprets the most common misconceptions about Bitcoin. ARK intends to participate in any debate about Bitcoin, which we believe should play an important role in a diversified portfolio.
Viewpoint: Bitcoin is too volatile to act as a value storage tool
Rebuttal: Bitcoin’s volatility just stands out
Adversaries often point out that Bitcoin’s high volatility prevents it from being a store of value tool. Why would anyone use an asset with such wild price fluctuations as a store of value?
ARK believes that these opponents simply do not understand why Bitcoin fluctuates, let alone understand the volatility of Bitcoin in the future will get smaller and smaller.
While Bitcoin’s price volatility has led naysayers to argue that it cannot be a store of value, it actually highlights Highlights of its monetary policy. The impossible triangle in macroeconomics explains this. As shown in the figure below, the trilemma assumes that when setting monetary policy goals, policymakers can only satisfy two of the three goals at the same time, because the third goal is mutually exclusive to one of the first two goals.
Each side of the impossible triangle is mutually exclusive. For example, if the authorities choose a currency with a fixed exchange rate and free movement of capital, they will not be able to control the growth of the money supply. Similarly, if one chooses a fixed exchange rate and an independent monetary policy, it will not be able to realize the free circulation of currency, and if one chooses the free flow of capital and independently controls the monetary policy, it will not be able to achieve a stable exchange rate.
Based on this impossible triangle, we can understand why volatility is a natural feature of Bitcoin monetary policy. Contrary to existing central banks, Bitcoin does not prioritize exchange rate stability. On the contrary, based on the money supply rule (independent monetary policy), Bitcoin limits the growth and total amount of its money supply, and satisfies the liquidity of capital, but gives up a stable exchange rate. So, the price of Bitcoin is a function of supply and demand. Its high volatility is no surprise.
However, Bitcoin’s volatility is decreasing over time, as shown below. As the acceptance of Bitcoin increases, the proportion of marginal demand for Bitcoin to its total circulation will gradually decrease, and the price fluctuation of Bitcoin will also decrease. If other factors remain unchanged, if there is a marginal demand of $1 billion for Bitcoin, this will have a greater impact on Bitcoin with a total market value of $10 billion. However, if the market value of Bitcoin reaches 100 billion US dollars, the marginal demand of 1 billion US dollars will not cause excessive price fluctuations. Therefore, ARK believes that volatility should not be the main reason for denying Bitcoin as a store of value, because the sharp price fluctuations of Bitcoin are caused by its sharp rise in price.
Bitcoin has grown significantly in purchasing power over time. For example, since 2011, the price of Bitcoin has compounded at an annual rate of about 200%, albeit with wild price fluctuations during the year. Since 2014, the minimum price of Bitcoin has increased every year.
Opinion: There is a bubble in Bitcoin
Rebuttal: Bitcoin is a strong contender for global currency
Many like Nuriel Roubini (Nouriel Roubini Economists believe that Bitcoin has a huge bubble that will burst at any time. These economists claim that Bitcoin has no intrinsic value, and its appreciation is entirely dependent on speculation, which is exactly the same as the tulip "scam", and only "bigger fools" are willing to pay a higher price to take over. In their eyes, Bitcoin has no investment value.
ARK believes that this argument completely ignores how Bitcoin accumulates value over time. Yes, Bitcoin is different from traditional investment assets. [1] equity category Asset values can be valued by discounting expected cash flows. The future cash flow growth of an investment asset will ultimately not depend on the asset holder.
However, monetary assets such as Bitcoin are non-productive assets whose ability to appreciate depends on their maintenance and ability to secure its value. In a sense, the logical loop of Bitcoin's value is: currency assets will appreciate as their demand grows, and if there is an effective currency asset value, more people will demand it. In other words, this is called "Money is a consensus belief", "Money is valuable because people think it is valuable".
Based on the argument that "the value of currency is entirely a consensus belief", then currency can be presented in any form. In fact, based on monetary history, the most common and durable currencies have some quality that supports their demand. For example, economists have long regarded gold as the most successful form of money, all due to its scarcity, fungibility, and durability.
Bitcoin is often referred to as digital gold. It not only has many characteristics of gold, but also takes these characteristics further optimization. Bitcoin is not only rare and durable, but also divisible, verifiable, portable and transferable. The various currency attributes of Bitcoin and the advantages that other assets do not have make it a favorable competitor for global currencies.
ARK believes bitcoin will be in at least as much demand as gold as a serious contender for the first global digital currencies . However, the data falsifies the Bitcoin bubble hypothesis, as shown below, Bitcoin’s network value (or market cap) is less than 2% of gold’s.
Viewpoint: The value of Bitcoin will be lost due to its fork
Rebuttal: The value of Bitcoin will not be copied by a single
In the digital realm, goods are physical objects, and all digital goods can be easily duplicated without destroying the original goods. For example, people can email the same Word document to different people while keeping the original copy. Similarly, thousands of people can listen to a song simultaneously and repeatedly, especially when some people imitate the original, which actually greatly increases the value of the original.
Bitcoin software is no exception. It's free and open source. Everyone can copy the software, "fork the network" and create their own version of Bitcoin. However, skeptics question whether there is any scarcity in Bitcoin if it is based on open-source software that can be copied infinitely?
First of all, forking the Bitcoin network will not create new "Bitcoins" for the Bitcoin network, just like The Venezuelan bolivar's currency issuance will not add dollars to the U.S. money market. Instead, forking Bitcoin would create a new network with entirely new coins. While existing bitcoin holders will be entitled to the new forked tokens, the forked network is run independently by other individuals with new rules. Open source software will not dilute the token supply of the original network, but encourages low-cost network experiments, and encourages the breeding of new tokens and fierce market competition.
Bitcoin’s scarcity is critical to its network. Today, the number of bitcoins in circulation has reached 18 million, and the release map of 21 million bitcoins is given below. Each bitcoin can only be put into one wallet at a time and cannot be copied. Most importantly, the only way to control a user's bitcoins is to get their associated private keys.
So what makes the 21 million BTC in the Bitcoin network more valuable than the 21 million BCH in the Bitcoin Cash network when Bitcoin forks? If the value of Bitcoin Cash is equal to the value of Bitcoin, it is like "forking" Facebook's source code to automatically copy its 2.6 billion users and value of 50,000 employees. Their value stems from the network effects of Bitcoin and Facebook, not just themselves.
In the case of Bitcoin, ARK believes that network effects include not only the hash power that secures the blockchain, but also Including Bitcoin's liquidity and the infrastructure that supports Bitcoin's application scenarios. If these are dilutable, then the fork will share Bitcoin's computing power, users and liquidity. As shown below, Bitcoin Cash and other forks appear to have failed to derail Bitcoin’s network effects.
Viewpoint : Bitcoin is misused by criminals
Rebuttal: Bitcoin is censorship resistant
The Opponents Bitcoin is still being accused of being used for criminal activities in the early years. During the first few years, Bitcoin has bankrolled Silk Road, an online black market platform known for selling illicit drugs.
ARK believes that to criticize Bitcoin for facilitating criminal activity is to criticize one of its fundamental value propositions: censorship resistance. Bitcoin, as a neutral technology, allows anyone to conduct transactions, and it is impossible to tell whether the user is a "criminal". Bitcoin uses cryptographically encrypted private keys and addresses instead of centralized institutions to identify users through IP addresses and names, which gives Bitcoin a strong ability to resist censorship. Anyone can transact anytime, anywhere as long as the participants pay the miners a fee. Once a transaction passes the settlement guarantee period, the transaction cannot be easily rolled back.
If criminal activity can be censored on the Bitcoin network, then all activity will be censorable. Instead, Bitcoin is about allowing anyone to exchange value globally, permissionlessly. That doesn't make bitcoin an inherent criminal tools. Phones, cars, and the internet are no less effective than Bitcoin in facilitating criminal activity.
In fact, only a small percentage of Bitcoin transactions are for illegal purposes. According to Chainalysis The data shows that the number of Bitcoin transactions related to illegal activities is less than 1% of the total transaction volume, which may be due to the transparency of the Bitcoin network. Any user can view the full history of transactions on the network, suggesting that physical cash is a better option for illegal activities. Indeed, as the graph shows, cash transactions account for a much higher share of illicit activity than cryptocurrencies.
Opinion: Bitcoin is an excessive waste of energy
Rebuttal: Gold and traditional banks consume more energy than Bitcoin
Bitcoin naysayers often assert that mining consumes more energy than it creates value. The low computing efficiency and poor scalability of Bitcoin that opponents believe are precisely the necessary trade-offs that advocates believe, and are the essential characteristics of Bitcoin. As Bit Gold and Bitcoin Pioneer founder Nick Szabo emphasizes, "The heavy resource consumption and poor scalability just release the security necessary for independent, seamless global and complete automation."
< p line="qVtX">ARK believes that Bitcoin has a unique decentralized, trust-minimized settlement assurance capability, because the dedicated hardware device transparently proves that the computer High cost calculations performed.
The trade-off in the Bitcoin network is clear: by using a lot of real-world energy to provide mining power, The Bitcoin network ensures transaction-to-transaction settlement like no other. In The Anatomy of Proof of Work, Hugo Nguyen of Chaincode Labs explained, "Essentially, the PoW mechanism is to convert kinetic (electrical) energy into accounting blocks. By assigning energy consumption to each block, it has real value traceability.”
Bitcoin’s energy consumption is often criticized due to its ease of quantification. However, in terms of electricity consumption alone, Bitcoin is globally more efficient than traditional banking and gold mining Energy consumption low much. Traditional banking consumes 2.34 billion gigajoules (GJ) per year, gold mining 500 million GJ per year, and Bitcoin consumes only 184 million GJ. Bitcoin consumes less than 10% and 40% of the energy of traditional banks and gold mines, respectively. Additionally, Bitcoin mining is 40 times more cost-effective per gigajoule than traditional banking and 10 times more cost-effective than gold mining.
Contrary to what most people think, we believe that Bitcoin mining has minimal environmental impact. Renewable energy sources, especially hydropower, make up a large percentage of Bitcoin's energy consumption mix. As Nic Carter, partner at Castle Island Ventures, pointed out that, in seeking the cheapest electricity, miners will continue to flock to regions that offer ample renewable electricity, freeing up energy markets to also become unrestricted. Efficient markets with regional differences. Ultimately, Bitcoin mining will become a beneficial activity.
Conclusion
Bitcoin's complexity should not be an obstacle preventing financial institutions from in-depth analysis of it. In this article, ARK discusses some of the most common objections to Bitcoin, hoping to spark discussion among the institutional investment community. As the Bitcoin network continues to mature, we believe it will solidify Bitcoin's role as an emerging monetary asset and attract financial institutions to take it seriously.
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