Is Bitcoin a "utopian value experiment"?

I think 'utopian value experiment' is a rather fitting description for Bitcoin, especially when looking back at its inception.

Why "Utopian"?

Imagine this: before Bitcoin, all our money had to be managed by centralized institutions like banks and governments. They could print more money (leading to inflation), freeze your accounts, and scrutinize every single one of your transactions.

Satoshi Nakamoto, Bitcoin's mysterious creator, sought to disrupt this status quo. He envisioned an idealized financial world:

1. No Central Authority: No banks, no governments, no one in control. Your money would be entirely yours to command.
2. Complete Transparency: All transactions would be recorded on a public ledger (the blockchain), visible to everyone, yet unalterable by anyone.
3. Globally Accessible: No matter where you were, as long as you had internet access, you could instantly send money to anyone on the other side of the planet, with very low fees (at least, that was the early vision).

At the time, this idea seemed like a financial 'utopia,' an ideal realm too good to be true.

Why a "Value Experiment"?

The money we typically use, like the Renminbi or US Dollar, is backed by national credit. Gold holds value because it's rare, stable, and has been recognized as such for millennia.

But what about Bitcoin? It has no nation behind it, no physical form. It's just a string of code. So, where does its value come from?

This is where the experiment lies: Can a group of people collectively create and sustain a new form of value, solely based on trust in a mathematical algorithm?

The variables of this experiment include:

• Scarcity: Bitcoin's total supply is hardcoded at 21 million, preventing over-issuance like fiat currencies.
• Consensus: As long as everyone believes it has value and is willing to use it for transactions and wealth storage, it holds value.
• Security: Protected by robust cryptography and a global network of computers, making it extremely difficult to attack or tamper with.

How is the experiment going?

Over a decade later, this experiment has been both successful and has deviated from its initial vision.

• Successes: It indeed transformed from being worthless into a global asset, with its market capitalization once exceeding a trillion US dollars. It proved that decentralized digital assets can possess immense value. This experiment succeeded, at least, in 'creating value'.
• Deviations:
  • It didn't become a currency for everyday purchases like coffee or bills, due to its high price volatility, slow transaction speeds, and high fees.
  • It functions more like 'digital gold,' a highly speculative risk asset, rather than the everyday payment tool envisioned in the utopia.
  • Although the concept is decentralization, computing power (mining capacity) and wealth have become increasingly concentrated in the hands of a few giants and early adopters.

In summary, Bitcoin launched a grand social experiment, attempting to establish a financial utopia. While it ultimately didn't fully realize that ideal, it opened Pandora's Box, giving birth to the entire cryptocurrency and blockchain industry, and forcing us to rethink what 'money' truly is. This experiment continues, and no one knows where it will ultimately lead.