1、This Is a Revolution, Not an Upgrade
BTS is one of the projects in the so-called “second-generation coins” (the full name is second-generation knockoff coins) that has raised the most money (so far) and has the loudest reputation (mainly in China). Whenever I casually take a swipe at it on Weibo, many enthusiastic netizens inevitably come over to “instruct” me, earnestly teaching me that I need to keep up with the times, need to be open and inclusive, need to keep learning… So I usually can’t be bothered to say much. This time, since I’ve been invited to write for 8BTC, I might as well concentrate my complaints here again, but I’m not responsible for accepting instruction from BTS fans.
There are some well-meaning netizens who always think that the reason I don’t look kindly on BTS is that I haven’t studied enough and don’t understand enough, and that if they help me make up the missing lessons I’ll be able to accept it. Too bad my ideas are old-fashioned and my thinking is closed, and I’m unwilling to learn new knowledge, which makes those netizens wring their hands in regret, very much in the spirit of “lamenting that the iron won’t become steel.”
But this attitude of “our disagreement is because you haven’t studied enough” is not a very good way to discuss things. It is a bit like the mentality of a missionary proselytizing: you don’t believe because you’re unwilling to learn. In fact, differences of opinion between people are often not due to differences in knowledge. For example, my dislike of spirit-medium theatrics is not because, after studying all the various ways of doing spirit-medium theatrics and all the mysterious theories behind them, I would then be able to identify with them. Of course, I definitely don’t have much enthusiasm for learning these sorts of things, but it’s also hard to say that this is caused by excessive conservatism or insufficient openness of mind. In a broad sense, of course, this can also count as being closed-minded, but if one’s mind is not at all “closed”—if one learns whatever one sees, believes whatever one hears—then there is no mind left at all.
If I deny from the root the reasonableness or necessity of spirit-medium theatrics, then I don’t need to learn its various details. Of course, if I completely look down on spirit-medium theatrics, then there is no need to barge into the circle of those mediums in order to “educate” them; keeping one’s distance is at least a basic form of respect. But on my own turf, standing far away and watching the other side’s spirit-medium theatrics being performed with such pomp and circumstance, I occasionally mock them a bit, and that is obviously not excessive. Mocking them is not to refute or educate them, but more to express my own views. For instance, if I want to talk about pursuing truth and abolishing superstition, I might use that bunch of shamans as a negative example. In that case, the audience I am facing is not those shamans, but my own audience.
So I never run over to BTS or any other knockoff coin’s turf to “preach,” and I also reject them preaching at me. Friendly and heated exchanges between people with different beliefs are of course a good thing, but if one adopts a mentality of “preaching” or “teaching,” then such exchanges become very hard to carry out.
I can be said to be a Bitcoin “fundamentalist,” meaning that I support, and only support, Bitcoin, and I look down on any flashy knockoff coins or second-generation coins. Thus, in my eyes, believers in “second-generation coins” are similar to adherents of a foreign religion, a cult, or a new religion. For example, Islam also acknowledges Moses and Jesus as prophets, except that it considers Muhammad to be the latest generation of prophet; Judaism recognizes only Moses; Christianity acknowledges Moses + Jesus; Islam acknowledges Moses + Jesus + Muhammad. So is Islam Religion 3.0, more advanced and more progressive than the earlier versions? Obviously it’s not that simple. I only acknowledge Satoshi Nakamoto’s idea, and then one group agrees with Satoshi Nakamoto + PoS, and another group agrees with Satoshi Nakamoto + PoS + BTSX. So I’m 1.0, and they are second-generation, third-generation—more advanced and more tolerant than me? It’s not that simple either. What lies behind the divergence involves faith, ideas, mentality, environment, and many other factors; it is not something that can be judged by the mere addition of an extra X by one side or the other.
Bitcoin users, when dealing with opposition from the traditional financial world, should also adopt this attitude: I stand on the more reasonable side, not the more advanced side. Bitcoin is not an “upgrade” of paper money, but a “paradigm revolution.” In many respects it advocates returning to certain ideas from the gold standard era. Its opponents are not merely backward in outlook or deficient in knowledge, but more often differ in their mode of thinking. If one sees Bitcoin’s revolution as merely a replacement of the old with the new, as something “one level higher” than paper money, then one will be off by a hair’s breadth but astray by a thousand li. That is even more ridiculous than seeing Islam as an upgraded version of Christianity.
2、Pegging to Fiat Is Just Redundant
Unfortunately, many believers in “second-generation coins” precisely regard their coin as an “upgraded version” of Bitcoin, and this can be seen even from the term “second-generation coin” itself. BTS is a typical example among them. The BTSX it provides, such as BitUSD and BitCNY, is also precisely an attempt to provide an “upgraded version” of fiat currency. In my view, such efforts—whether “improving” fiat currency or “improving” Bitcoin—are all redundant embellishments, like putting a saddle on a car. Apart from seeming flashy, they are meaningless.
It is said that BTS itself is not a currency, but something like a stock, and that on top of it one can develop all sorts of projects. The flagship project is BTSX, and within that the flagship products are BitUSD (Bitcoin-dollar), BitCNY (Bitcoin-RMB), and so on.
The whole BTS thing is a huge pit, and you can tell from its fund-raising model. But let’s set that aside for now. Let’s just talk about what BitCNY is all about.
BTSX uses a complicated mechanism to generate BitCNY. I say complicated because many of the details would take a long time to explain, but in broad strokes it’s actually quite simple: users can collateralize BTS to mint BitCNY. And this collateral mechanism achieves the so-called “pegging” effect, making the value of the minted BitCNY roughly equal to actual CNY. Thus BitCNY becomes “Bitcoin-RMB,” and BTS supporters believe that this electronic Bitcoin-RMB will be easier for merchants to accept, because compared with Bitcoin its exchange rate is more stable and it can be used as if it were RMB for accounting.
Critics of BTS usually focus on questioning the possibility of “pegging.” Indeed, pegging depends on the value of BTS; if BTS collapses, the peg will fail. Of course, BTS supporters will give many reasons in response, such as how extreme such a scenario would be, and how it might still be handled even if it did occur. But that is not where my focus lies. In fact, whether something can be pegged is itself a relative proposition. In the short term, keeping the BitCNY exchange rate relatively stable for a month can also be said to have achieved “pegging”; keeping it stable for a week or for a year can also be called pegging. Being able to maintain a relatively stable exchange ratio for a certain period of time is nothing unusual. But in the long term—for example, over a span of ten years or several decades—I do not believe a peg can be maintained forever. Of course, if BTS remains extremely niche, with just a handful of fans entertaining themselves, then a perpetual peg might indeed be possible. But if BitCNY becomes popular—for example, if its total amount reaches one percent of RMB circulation—can it still be pegged? In international currency competition, some actions that tried to peg exchange rates with the strength of an entire nation ultimately all failed. Can BTS really do it? The reality of so-called successful pegging over these past few months is built on the premise that circulation and application are so small as to be negligible. Some platforms offering CNY to buy and sell BitCNY may appear to remain basically within the range of 0.95 to 1, but their trading volume and market depth are pitifully small, possessing almost only symbolic significance and proving nothing at all.
But the more crucial question is: even if we say “pegging” can succeed, what does that mean? If pegging is basically meaningless, then the debate over whether it can be pegged looks very boring indeed. For example, if some people want to put a saddle on a car, then of course there will be many questions: can the saddle be fastened securely, should it be made of iron or copper, should it be mounted on the roof or on the hood… A small group of people exhaust themselves over these technical issues and argue endlessly. If I, passing by, ask one sentence—why put a saddle on a car?—I’m afraid they would sneer at me and even kick me out the door.
BTS supporters believe that BitCNY, pegged to the RMB, helps those merchants who are willing to accept the convenience offered by electronic money but cannot accept Bitcoin’s exchange-rate volatility to accept payment in electronic money.
This sounds as if it makes sense, but in fact those merchants are mostly imagined by BTS supporters. Not even comparing it with Bitcoin—just comparing it with BTS—why wouldn’t merchants who are happy to accept BitCNY simply pay directly through BTS? The reason, it is said, is that BTS, like BTC, has a fluctuating price, whereas BitCNY is pegged to the RMB and is therefore suitable for accounting. But note that payment and booking revenue are two different links. Right now, merchants who do not accept BTC exchange-rate volatility are all supporting Bitcoin payments through third-party platforms such as Coinbase and Bitpay. Users can send Bitcoin to merchants through intermediary platforms, and the intermediary platforms handle the settlement, with the merchants finally receiving fiat currency directly. In such a system—priced in dollars, paid in Bitcoin, and recorded as dollars—merchants do not need to consider Bitcoin’s volatility.
If you think Bitcoin is bad and BTS is good, then you can also build a BTS payment platform, and merchants can still record revenue in fiat. It is said that BitCNY can more easily persuade some traditional merchants to accept electronic payment, but in the process of persuading them you must first persuade them to understand BTS’s mechanism. The significance of BitCNY applies only to merchants who happen to be willing to accept BitCNY but not BTS. I cannot imagine how many such merchants there would be.
If I do not understand or do not accept BTS’s mechanism, I am still willing to accept RMB. Through an intermediary platform, I can still enjoy many of the benefits brought by decentralized cryptocurrencies. But why would I dare accept Bitcoin-RMB? If after receiving Bitcoin-RMB I immediately exchange it into RMB for bookkeeping, then that is exactly the same as receiving BTC or BTS and exchanging it into fiat for bookkeeping. Why go to the trouble of adding another step? If after receiving Bitcoin-RMB I directly book it as revenue and store it, then what am I aiming for? If I prefer the stability of fiat currency, why wouldn’t I store stable fiat currency, rather than store this Bitcoin-fiat?
BTS supporters may give many reasons—for example, merchants are afraid of trouble, so once they have received BitCNY they are too lazy to go out of their way to exchange it for CNY. But third-party payment platforms can absolutely provide a more convenient service and handle the exchange for you. Or, for example, third-party payment platforms are centralized and therefore unreliable. But since the target is merchants who seek stability, I imagine they are not very demanding about whether something is decentralized, and they would probably trust a正规 intermediary company whose people can actually be found more. Or, for example, hoarding BitCNY can generate interest income. This seems to be the only reason that sounds somewhat plausible, but that is precisely a major source of instability. In the current small-scale environment, running an annual interest rate of 10 percent is no big deal. But if BitCNY’s application really were to reach a certain considerable scale, could a special demand deposit rate remain unchallenged within the fiat financial system? One must know that the reason Bitcoin’s exchange rate fluctuates so violently is often because of its entanglement with the existing financial world. Today there is one announcement from China, tomorrow one move from the United States, and Bitcoin’s exchange rate shoots up and down. Right now governments around the world do not have the time to manage this small-time “pseudo-fiat currency,” but what if someday they do want to manage it? Which is stronger, BTC’s ability to withstand policy shocks or BTS’s?
In any case, a merchant pursuing stability probably would not choose to book revenue in BitCNY, unless he already supports BTS, or has an especially unusual way of thinking, which I still find hard to imagine.
3、What Bitcoin Seeks to Overturn Is Exactly What BTS Insists on Preserving
What I said about BTS’s redundant design is that its root lies in limiting the understanding of new currency to a certain kind of “upgrade,” rather than a revolution. In its view, the significance of electronic money lies in being more convenient, more stable, and so on. But these are precisely not Bitcoin’s core significance. Bitcoin’s basic idea is “freedom,” the “liberation” of money. BTS has borrowed Bitcoin’s banner of “decentralization” (as for how it actually works, allow me to say hehe), but it has grasped the form without grasping the spirit. To explain why Bitcoin wants decentralization, one must first understand why fiat currency is centralized. It is said that the centralization of fiat currency is precisely for the sake of “stability.” Governments and economists exhaust themselves, adjusting interest rates at every moment, coordinating and planning inflation rates and price levels, introducing QE and a whole series of high-tech measures to control the monetary market, all supposedly in order to maintain “stability.” It seems that once the fluctuation in currency value exceeds the government’s control, terrible things will happen and the economy will lose order.
And Bitcoin is precisely meant to break the logic in traditional money that says “stability overrides everything” — to let go of control and let the free market decide fluctuations in monetary value. So what? Of course, many economic activities built upon the existing financial system will face difficulties, but what if that financial system itself is unreasonable?
In addition, Bitcoin also seeks to break the “virtualization” of money. I have said many times that although Bitcoin is electronic money, it is precisely more real than fiat currency. Fiat currency is produced by being forged through virtual collateral. For example, in earlier times one used gold as collateral to mint money, or later China used U.S. dollars as collateral to mint RMB, or the United States used tomorrow’s debt as collateral to mint today’s money. Using BTS as collateral to mint BitCNY is a similar logic. It can also be collateralized into Bitcoin-gold, Bitcoin-oil, and all sorts of virtual assets. These assets are closer to fiat systems, which excel at conjuring something from nothing, and are incompatible with the world of Bitcoin. Attempts to peg the fabiancurrency notes of the Republic of China to gold, or to peg the RMB to the dollar, failed not because the technology was insufficient (so now BTS brings the latest technology), but because they went wrong from the very beginning. Paper is paper, gold is gold. Paper cannot and need not be pegged to gold. All these so-called pegs are either wishful thinking or some kind of conspiracy. Bitcoin sees through all this, and so Bitcoin is no longer a virtual token. It is not a collateralized claim on something or a counterpart to something. Bitcoin is Bitcoin. It is another kind of tangible currency that has come roaring back after gold and silver, setting the disorder of virtual currency (fiat currency) right.
Therefore the things Bitcoin ultimately wants to do are far more radical than BTS. As for promotion during the transitional phase, platforms like Coinbase are enough to provide support. BTS is purely redundant embellishment, while beyond the transitional phase, Bitcoin’s ideal is something that BTS and the like can hardly even imagine.
Translated from the Chinese original with AI assistance. The original text is authoritative.
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