[Translation, OC] Bitcoin Will Never Be “De-Chinafied”
Happy Friday morning fellow denizens of Bitcoin Land! Some of you may have noticed that a user by the name of huangshiliang has posted several articles in Chinese on this platform over the last several days, all of which, in this translator’s opinion, might be of interest to the wider community here. As such I have translated what I think is one of huangshiliang’s best articles so far. I hope it will provide some insight into the current situation regarding China’s renewed regulatory scrutiny of Bitcoin. If there is widespread interest in this type of content here, I will try and set aside more time for future translations.
Bitcoin Will Never Be “De-Chinafied”*
Original Author: huangshiliang
Part 0 - Introduction
The media has come out and once again declared that the Chinese authorities will completely ban Bitcoin, precipitating yet another wave of talk regarding the potential “de-Chinafication” of Bitcoin. This development is hardly worthy of concern. The “de-Chinafication” of Bitcoin is simply impossible.
Part 1 - Capital is by Its Very Nature Profit-Seeking
Capital, by its very nature, is profit-seeking, and Bitcoin itself is a product born of capital. It is because of this that we describe Bitcoin as a speculative instrument, investment, or currency. Capital seeks out profit instinctually - this is a law of nature, and it is not something that can be controlled by any legal system. A legal system can restrict, guide or divert, but it cannot prohibit this profit-seeking. As Marx said, “if capital can obtain a one hundred percent profit, it will not hesitate to trample over all the laws of the human world.”
This is a law of nature, just like gravity. The government cannot prohibit capital from seeking out profit just as the government cannot impose a ban on gravitational attraction.
But suppose the government insists on attempting to subvert this natural law? After all, if our all-powerful central bank wants to ban Bitcoin from being pursued as a form of capital, what recourse do we have?
It would not be the first time the government or other organizations have attempted such a thing and history is replete with similar examples.
Before China's reform and opening up under Deng Xiaoping, the government passed legislation making it illegal for any Chinese citizen to pursue profits using their capital and conducting any kind of regular business was regarded as treason. Yet there were still some small villages that went directly against the official central policy, in some cases even declaring openly that they were prepared to face the ultimate penalty rather than obey. This was a landmark revolutionary event that ultimately lead to a loosening of the policy for all farmers throughout China. During that same era, there was the famous case of the “Simpleton Sunflower Seeds” company that faced tremendous social criticism after they single handedly bought up and illegally cooked all the available sunflower seeds in China, even going so far as to import additional seeds. Their act of rebellion laid the groundwork for China's self-employed to ultimately gain legalized status.
The shipping container was invented more than 50 years ago. As a completely revolutionary mode of transport, the shipping container greatly reduced transportation costs, making it significantly cheaper to produce products in China and ship them to New York City than it was to produce the same products in the area surrounding New York City, thereby changing the global economic landscape. The availability of standardized, automated shipping containers had a direct impact on dock workers who depended on loading and unloading ships for their livelihood. These entrenched interests attempted to prevent capital from moving toward areas of higher profit. The dock workers resisted the new technology by staging rallies and strikes, with 21,000 New York dock workers gathering in Madison Square Garden. However, all of their efforts were futile and there was nothing they could ultimately do to stop the new wave of technology; shipping containers quickly came to dominate mainstream shipping.
You may remember last year's violent attempts by taxi drivers to resist the introduction of ride sharing services. They went on strike, petitioned the government with hat in hand and even beat up other drivers... yet did any of their efforts to prevent the rise of more advanced resource integration technology provide higher profits to the owners of capital?
Earlier history is peppered with even bloodier examples. More than one hundred years ago, the Qing dynasty thought they were invincible and that “those red-haired foreign merchants” were lucky to make money in China by the grace of His Majesty the Emperor. Eventually the Qing emperor's view of these foreigners soured and he sought to prevent them from doing business with the Chinese people. In response, the foreigners came back with their formidable boats and guns and forced China to open her doors for business, killing countless lives in the process. This is the simple nature of capital.
Part 2 - Bitcoin is a System-Level Invention in the Broader Context of Human Civilization
In the 15th and 16th centuries, a Portuguese prince invented the gondola, making it possible for very large ships to dock without the benefit of a deep-water port. But more importantly the invention made it possible for large ships to hug the coastline during their voyages, so sailors could always see the coastline for added safety and peace of mind. In an emergency situation sailors now had the option of swimming to land rather than perishing at sea.
This relatively minor invention enabled Europeans to visit Africa, the New World, China and India in large numbers and ushered in the beginning of the Age of Exploration. This is what might be called a civilization-level innovation - the gondola promoted exchange between different people and lead to human kind truly becoming a master over planet earth rather than just another petty landowner.
In the past two decades, the invention and development of the Internet has also represented a system-level innovation in the developmental history of human civilization. This is because it allows instant communication between people, regardless of geographical location or time differences. During the Age of Exploration, sailors would have to take guns with them to foreign lands, lest they be killed by hostile locals. This was in part because they could not communicate - they were completely in the dark.
However, with the rise of the Internet, we can now communicate freely at a cost that is so low as to be negligible. Once we have this ability to communicate everyone quickly realizes that other people are not too different from themselves, reducing conflict and increasing cooperation. The importance of this power to reduce communication friction cannot be overstated as far as human civilization is concerned and it can be safely called a system-level innovation in the broader context of human civilization.
Bitcoin is the latest system-level innovation to emerge in modern human history. This is because for the first time in history Bitcoin makes it possible to do business across borders in a frictionless manner. When I worked with an Australian doing translation work in 2014, he was able to pay me on a daily basis. Currently I work with a Japanese partner on another business and we use Bitcoin or BCC for settlement.
Can you imagine attempting to do the same thing before the invention of Bitcoin? Without Bitcoin, how does one do business with foreigners? You need to deal with big banks, high fees, long wait times, professional accountants, tax officials... now all of that is no longer needed. This is why Bitcoin represents a system-level upgrade to human civilization.
As the Chinese authorities seem so eager to ban bitcoin, we need to keep in mind that at the macro level of human civilization Bitcoin is a system-level innovation. The Chinese people are the most important members of mankind, with the largest population on earth. How can one expect to prohibit us from performing a system-level upgrade? What will be the outcome of such prohibition? What was the outcome of the Qing emperor's attempt to close off China from the rest of the world?
Part 3 - Government and Bitcoin Are Locked into a Long-Term Game
Bitcoin has already moved beyond the most brutal phase of its confrontation with government, with the US government leading the pack. Following round after round of lobbying in congress by US enterprises, a large number of US states have already defined Bitcoin's status as a currency and as a commodity within their respective legal frameworks.
But just like ride sharing companies, Bitcoin naturally disrupts a large number of interest groups connected to fiat currency and there will necessarily be a lack of clarity regarding the relationship between Bitcoin and government. Bitcoin will not have an easy time as it continues on its collision course with the old order, but the natural adventurousness of human capital will play an important role in this process.
This year the Chinese government has planted itself before Bitcoin and put up a very strong front. This is a significant challenge for China's Bitcoin entrepreneurs, who are trying to reach a compromise with the government and find a way to survive.
From a profit-loss standpoint, the overall social benefits of Bitcoin are positive, and no responsible government can afford not to take advantage of said social benefits to protect the interests of the old system. In the face of this new phenomenon, resisting the temptation to put up a strong resistance or take radical measures is likely the most cool-headed solution as far as the government is concerned.
The state banning all Bitcoin exchanges would be no different from the Qing emperor's closed-door policy.
We must realize that Bitcoin is no longer in its infancy, it is growing fast every day and has been welcomed by the people. I submit that Bitcoin is still getting through the awkward stage of its adolescence, struggling to face the challenges of society while unwaveringly showing the world its strength, and there are no signs that its growth will slow down.
Bitcoin and the government are inextricably linked, and the Bitcoin industry needs the government's support. The government can also use Bitcoin technology for the benefit of society at large. The inherent properties of Bitcoin as a currency naturally hurt governments that enjoy the “exorbitant privilege” of seigniorage, and Bitcoin and governments will inevitably become locked into a long-term game.
Part 4 - Bitcoin Will Survive in China, One of the World's Most Important Economic Nodes
Now then, let us suppose the government takes a very strong stance against Bitcoin and China's Bitcoin entrepreneurs are compelled to give up ground as a once free market is subject to gradual tightening. If this happens, China's Bitcoin transaction volume will decline severely, yielding its dominant market position to Japan.
The price collapse many people expect will not happen, and the more difficult it becomes to purchase Bitcoin on an exchange the more popular OTC transactions will become. Demand for Bitcoin will not simply disappear because of a stance taken by the central bank - the only thing that will happen is that centralized exchanges will no longer be able to meet demand which will move to OTC markets, which are much more challenging to regulate.
In February 2014, Russia issued a blanket prohibition against Bitcoin. However, Russian trading volume on LocalBitcoins.com (the world’s largest OTC Bitcoin trading platform) increased more than 300-fold within 10 months of the announcement of the ban in February. The ban was effectively meaningless, and in fact did nothing more than push Bitcoin transactions completely into OTC and underground markets, creating ideal conditions for those engaged in the business of laundering money and evading capital controls.
If there is profit to be had, capital will chase after it. If there is a price differential, there will always be traders who are willing to bear the risk of disobeying the law to profit from arbitrage. Human law is no match for the laws of nature, and capital will always seek out profit even in the face of legal sanctions, provided the profit opportunity is sufficiently high. In other words, “if capital can obtain a one hundred percent profit, it will not hesitate to trample over all the laws of the human world.”
China is now the center of the world or is at least increasingly becoming the center of the world. China is indeed rising to a certain degree, and I say this not out of blind patriotism. Why is it that the worlds Bitcoin miners and hashpower are concentrated in China? The answer is because the world's production center is in Shenzhen and Dongguan. Deploying hashpower in China offers the lowest cost and highest profit option for entrepreneurs. Capital naturally chases the highest profits - it cannot help but do so.
In China, doing Bitcoin-related business is profitable and this is an inevitable result of China's economic development. There is no money to be had by going to Afghanistan to run a Bitcoin operation because it is poor area to which capital will not go. There is profit to be had in China and it is therefore not possible to prevent Bitcoin from taking root in China on the back of capital.
Therefore, Bitcoin simply cannot be “de-Chinafied” and even a blanket ban by the central bank would be futile.
That is unless China is no longer a meaningful global economic node, or Bitcoin is no longer a superior investment or a superior currency.
Part 5 – Conclusion
China will not be able to close down all exchanges and the “de-Chinafication” of Bitcoin is an impossibility.
*Translator’s Note: Here the author uses a play on words by making a minor substitution in the word “decentralization” (去中心化) to create the novel term “de-Chinafication” (去中国化).
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