Chinchilla TOC Blockchain Academy - The Evolution of Money, The Precursors of Digital Currency

Totoro TOC Blockchain Academy Guide: Only by clearly recognizing the predecessors of digital currency, will we understand why the investment in digital currency should be more cautious!

Before that, I talked about some opinions. First, I personally oppose "Ai Siou," and I will specifically talk about it later. Second, I think that everyone should be more cautious about investing in digital currency. Because 99% of the so-called tokens, the probability of the final settlement of the arcade currency is very large.

First, the value of money as a general equivalent

In the history of mankind, there was no solution to two issues. One was the transmission of information and the other was the transmission of value. In the beginning, we passed interviews and later wrote letters, telegrams, telephone calls, and e-mails. We finally reached WeChat. The revolution of the Internet has made the transmission of information has been described by a big explosion. We have passed this road for thousands of years. At the same time we also want to deliver value. At this time, one of the core tools to be used is money.

All things in the world are said to be valuable. What is value? Value is a concept that forms in people's hearts. For example, hairy crabs are rubbish in Germany and are thrown there. But in China, it becomes a food. Therefore, in Germany, the value of hairy crabs is almost zero, even negative. When you sell the crabs from Germany to China, you will earn money. Values ​​vary among different ethnic groups, different communities, and different countries. It has different metrics.

In order to measure this thing, our ancestors were originally exchanged for things, and later it was very inconvenient. We needed a currency as a general equivalent.

Second, the evolution of currency

Money starts from shells. Where is that shell? Not people on the beach use shells, but people in the mountains use shells. So what is the beach? People use stone on the beach. Because there are rocks in the mountains, but the sea lacks rocks, so everyone is used to expressing value through scarce things. However, shells are too fragile and difficult to preserve, so they have evolved into metal currency, are easy to store, and are easy to divide. However, the metal currency has a natural weakness, it will be deflation, and the flow rate is relatively slow, making the world's economy unable to develop rapidly. After the industrial revolution, the metal currency was not suitable.

Later there were banknotes. The earliest banknotes in the world are in Sichuan, China - Jiaozi. In Western society, for the first time in France, modern currency notes have appeared. The initial paper money was meant to make its value concept solid, and it needed to bind with the precious metals that form a solid value in mind to make it trade. However, the gold standard still limits the liquidity of banknotes. By 1971, the Bretton Woods system collapsed and the entire world became pure credit notes. The gold standard has since withdrawn from the market.

Compared with metal currency, pure credit paper currency has the advantage of being easy to carry, easy to turn around, and easy to activate the economy. The downside is that its circulation is determined by people. Therefore, inflation often occurs, which is what the paper money brings. The seigniorage is the highest. This is why all countries are staring at inflation and financial regulation.

Third, the emergence of bitcoin is an inevitable trend in history

From 1971 to today, after more than 40 years of continuous increase and expansion of pure credit notes, the bubble has accumulated tremendously. In the gold standard era before 1971, the cyclical economic crisis, the mismatch between currency and economy, led to economic recession and took a long time to recover. Later, after leaving the gold standard, we used financial means to avoid the economic crisis. The typical economic crisis in these 40-plus years is not large in large countries, but the financial crisis erupts periodically, and it erupts every 10 years. Banknotes are very effective in fighting economic crises. They also have side effects that are the credit expansion of the entire society, leading to the collapse of cyclical asset prices.

In the past 40 years, 10% of the wealth of the richest people in the United States has been growing, especially since 2008. The income of the general public is in a process of continuous decline. Therefore, the days of the ordinary people are getting worse and worse. This is due to the huge problem caused by the unequal distribution of the legal currency.

In order to avoid this asset price collapse, technology geniuses and economists began to try to use electronic cryptocurrencies to solve problems. After a disparaging effort by the team, Bitcoin came out. I hope everyone will look at the development trend of society from the perspective of history and the whole macro. The emergence of digital currency is an inevitable process. The long-term trend of being virtual, easy to divide, easy to transmit, easy to maintain, and best not to be controlled by a single entity.

IV. The initial Mississippi bubble of the notes

I share a few stories for everyone. Many people have said that bitcoin is a tulip bubble and that the tulip bubble was only a few. For us, the more significant research is the Mississippi bubble. The Mississippi bubble occurred in France and was the bubble that occurred during the first large-scale use of banknotes by mankind. John Lao, a British businessman, believes that future society can use banknotes with certain credit endorsements. This theory was not accepted in Britain at that time. Later, when France encountered financial difficulties, the Duke of Orleans used the country’s land as an endorsement to issue new banknotes. As a result, France entered a very prosperous scene overnight.

The paper money had a very good effect on economic prosperity and stability. Later, the Duke discovered that the banknotes were good, so he began over-printing. He didn't have much land to support the value of money, and he engaged in a Mississippi company to mine gold in the United States. That is, in the central part of the United States today, there is no gold in that place. This lie was punctured. The entire banknotes in France collapsed completely and the first human banknote experiment failed. At this time, everyone knows that the drawback of banknotes is that they will be overproduced, but if the circulation is well controlled, it will promote economic development. So after decades, many countries have adopted banknotes.

Any new things are twists and turns, even if it is today's dominant banknotes, it is also very frustrating at the beginning of its birth.

V. The cultural background of the blockchain

Everybody often divides the currency circle and chain circle. We hope to separate the currency and the chain. From my point of view, the currency and the chain are inseparable. The blockchain system is that people use currency as an incentive mechanism to make the entire system work very well. So we have to look at the chain and the currency and it is the latest human collaboration tool. In the past there was a tower of Babel where humans united to build a tower that hoped to lead to heaven; God wanted to stop human plans, let humans speak different languages, and made humans unable to communicate with each other, and the plan failed. Since then humans have each Scatter things, the Tower of Heaven will not repair. Today, the blockchain uses technology to create a collaborative relationship with strangers and is building a new Tower of Babel.

The blockchain is actually letting everyone cooperate on a large scale and is building a new Tower of Babel. The normal population cannot break through the level of 150 acquaintances. Normal managers are also unable to break through the management of 6 to 7 people. The use of a blockchain as an incentive mechanism can be achieved. Although we do not know it, the collaborative boundary of the whole society is boundless. The blockchain changed many of the previous organizational structures. It is time to observe and design blockchains from the perspective of humanities and economics, and not just design blockchains from a technical point of view. This is a misunderstanding of the blockchain practitioners we often encounter!

Since we have just observed from the perspective of humanities and economics, what is the economics of the blockchain? Many of us have studied microeconomics. Macroeconomics, blockchain is not based on quantitative economics, blockchain is based on game theory and institutional economics.

What is game theory? There is a famous prisoner's dilemma in the game theory. The two men were caught in the prison. The police station lacks sufficient evidence to prove the crimes committed by them. If at least one of the criminals confessed the crime, the conviction can be confirmed. In order to obtain the necessary confession, the police detained the two criminals separately: if one of them had pleaded guilty to confession, the confessor would immediately release him and the other would sentence him to eight years’ imprisonment; if there was no one to conspire, he would basically Everyone will explain it, so this result is not the best result. This theory is called non-cooperative game theory.

So what kind of result is better? An invisible line was drawn between the two people. They knew each other and did not explain it. Then they got the best result. The blockchain made such a line. If people don’t trust each other, To achieve the goal of mutual cooperation, this is his greatest value.

According to the Coase Theorem of Institutional Economics, simply speaking, transaction costs are minimized, the degree of freedom of market exchange is high, and the property rights are clearly defined. This economic theory is also the basic economic theory of the Bitcoin blockchain. If you are interested, you can look at books related to game theory and institutional economics.

Sixth, the blockchain has a tendency toward corporateization

The development of the digital world did not start today. Since the Internet promotion in 1995 was a long time ago, transaction costs have actually been declining. What impact will this have?

In order to do business in one piece, humans must consider the issue of transaction costs. When the partners went out to sea, if they did not trust each other and their interests were not bound, what would it do if they did not come back? At the time, social transaction costs were high and they did not trust each other. Therefore, the company organized internal trust to reduce transaction costs, so that the company made money. When the company was small, it developed very quickly. When the company was big, it met the ceiling. When the company is big, it becomes a society. The transaction cost of a company is equal to the transaction cost of a society, and it is difficult to grow again.

The large companies that collapsed in the past 20 years are particularly large, and many large companies have fallen. The development of the Internet has led to a reduction in the cost of social transactions. Before there was a six-space theory, every six people could know anyone. The WeChat era has now become a three-dimensional space, and one or two people can know anyone. Social transaction costs have fallen sharply, but the company's transaction costs have remained. Many companies have not adapted, and they have collapsed. In other words, you either have to dismantle the company or use new information technology to reduce the company's internal transaction costs, otherwise your company will not survive.

Over time, we have minimized the company’s internal transaction costs and the social transaction costs have become lower and lower. In the process of realizing human low-cost collaboration, blockchains may also gradually realize the dematerialization of this organizational form of the company.

Seventh, the characteristics of the digital economy system

The first is non-profit, and we have to reduce transaction costs to zero. Of course, if it is not profitable, any profit is a manufacturing advantage. At the threshold of entry for competitors, you create a threshold for competition. For the entire society, it is the increase in transaction costs. The second is de-corporate. The third feature is the safe transmission of value. The fourth feature is the decentralization of the blockchain, which makes the entire system more tough, but the characteristics of human beings make it impossible for us to completely go to the center.

Eight, the application of digital currency

Should we use cryptocurrency anywhere? not necessarily. Now that various countries are studying digital currency, I do not think that digital currency will be replaced by a large amount of cryptocurrency. So what is cryptocurrency for? Cryptocurrency is more applicable to the transfer of intangible assets, such as human wisdom. In fact, today's human patent designs have many things that must be indirectly achieved through material exchange. In fact, many human values ​​are not reflected. Human beings are relying on their own intelligence and relying on their own hands to change the world. This is the greatest value.

Bitcoin has just created a miracle. A bunch of coders have compiled a program and then become rich. Blockchain is the most suitable for value transfer and value discovery of intangible assets. Therefore, we must pay attention to this point, I am optimistic about the direction of those intangible assets as the main operation, not optimistic about the traditional thinking and the exchange of goods. The way to go to replace the human currency is not appropriate, I think.

IX. Value Sources of the Digital Economy: Community and Data

1. Community
   Our digital economy is very much concerned with the community. Pulling a few WeChat groups is a community. This is not the case. It is called WeChat Group and it is not called a community. The community is an area in which people share common interests and common passions, and it is best to be a geek community. The more the VIP customer has value, the more so only each person will contribute to this. I think the geek community is truly a valuable thing in this world. Are you a geek? Many people tell me that they are not. Everyone thinks that there are only techno-geeks. Everyone is a geek. As long as you have a hobby, if you don't even have a hobby, you are really boring.

Geeks such as painting, clothing, food are OK. The token issued by this geek community represents the value of this geek community.

2, the value of the data

Another value is the value of numbers. The value of the community is first, and what is the value of the second number? The data produced by all people is not in our own hands and is monopolized by the major institutions. Is this right? wrong. In fact, these monopolies use our data to make money. We mentioned the concept of data sovereignty. In the future of the blockchain era, there must be a huge concept of data sovereignty, so that the data and the value of the assets generated are obtained through the blockchain. The true embodiment.

There are three types of good blockchain projects in the future: one is that they can really represent geek communities, one is data sovereignty that can represent certain areas, and the third is a system that can make these values ​​very well. Everyone can think about it.

1. What is the opportunity for blockchain in 2018?

Personally, I think it lies in infrastructure. Today is like the Internet before 2000, the speed is very slow, the application is very few, the system is insecure, and you have to take the floppy disk. This era is problematic. You can't make some great things based on this era.

This year I think the biggest investment opportunity lies in the infrastructure, including exchanges, public chains, wallets, and cyber security. I am more optimistic about cyber security and wallets. Today, the digital market is streaking, because stealing information in the Internet era, stealing money, and cyber security are not enough. For example, a lot of exchanges also need a substantial upgrade, so that network security is upgraded to a financial level. After these infrastructures are available, the entire blockchain application era will erupt.

XI. The value of many projects in Iasi is doomed to zero

At the beginning, I said that I firmly oppose Athio. Why? If you want to develop a good project, you must have community value and you must do a geek community. What is Ai Siou? Issuance, recruitment. In fact, the community you introduced, a large number of coin circle communities, are actually speculative communities, and have no relationship with a geek community. When you introduce a large number of speculators in a system, do you want to establish a real geek community? Sorry, you can't build it.

Ai Siou logically has these problems, especially public offerings. First, ordinary people are really confused about whether they are good or bad. There are many air projects now, really good