Bitcoin has an incredible confusion almost every herbivore. Nobody knows what happens. In this phase, he came against software developers, economists and finance workers. Today Turkey Deputy Prime Minister Mehmet Simsek said Bitcoin has great risks for speculators and those making investments. On the other hand, the CMB and the Ministry of Finance announced that Bitcoin is working on taxation of its profits. I intend to enlighten you in this article.
Step-1 - Every invention comes from a need. I have read somewhere that the man who is trying to meet with the girl he loves, but who always gets the answer "We need to knit these socks before winter comes, we can not meet without them," finally had to invent the sock knife machine. Maybe not, but the message is clear. Every invention comes from a need.
Step-2: Payment for the media: For example, in Turkey too is widely everybody in payments begin to use PayPal's permission before termination of activities in Turkey is a tool that enables incredible ease, I was using, too. Currently you can pay with PayPal all over the world (not active in Turkey). The similarity with Bitcoin could perhaps indirectly, but in Brazil, you could receive payment from a man in Turkey and PayPal, the money in your account, if you wish you could send your credit card if you want to your own bank. BUT! Paypal earned serious commissions per transaction and earned significant money. One look was the intersection of all the credit cards in the world. He was just mediating. The idea was perfect, but it was a standard payment instrument. The main reason for the birth of PAYPAL was to assume a barter duty in international payments and not to pay the payment in the first instance. But it cost a lot.
Step-3-Commissions for sending money: The main reason for giving BITCOIN was the need to transfer money with a greedy intermediary (Banks, Paypal, Pos machines, etc.) without paying commissions and at close to zero cost. But the currency in this system could not be the US dollar, because the US dollar was under the control of the Federal Reserve, and you can not print a new dollar. If you created a global currency without the prejudice of the currency of any country, if the people showed interest, this currency could be used all over the world. The bureaucracy was reduced to zero. Because it will be digital, you have a currency that you can reach anywhere at any time.
Step-4 - The emergence of Bitcoin - Named by Satoshi Nakamoto, published an article introducing Bitcoin to the world. Nakamoto's character is mathematician and software developer. Without seeing any financial institution, he saw the space to perform the transfer of money directly from the buyer to the seller or the payee, and he built a massive payment system. I will explain in detail this system with a simple example that I will not enter. But I can say that about reliability. I've seen how safe your money in the bank is, and your bitcoin wallet is so safe.
Step-5 - Bitcoin technical details: Everyone who reads this article probably has an e-mail address. Can someone else enter your mail account? If you give your cipher, of course it will. Or, if it is hacked, your email address can be captured by someone else. You can send mail to someone. Think about it ... You have a virtual wallet like the mail box (bitcoin wallet) and you can send it to everyone in the world who has a bitcoin wallet. You pay a lot of commission (5 in ten) when you send bitcoin, but you do not pay commissions when you buy bitcoin. Moreover, this process takes place instantly and you do not wait for 2-3 days as it is in banks. Whoever sells Bitcoin to you is paid by the commission. Here, you might have a security problem, but crypto encryption is much more advanced than passwords in mail programs, and they say that it is impossible to break it. I am an economist and I will tell you what is my specialty.
Step-6-How do we value anything? This is the most important point that software developers have missed on Bitcoin, focusing on security issues. How many dollars should BITCOIN be? Is it expensive now? Is there any possibility of further increase? Can we really value bitcoin? People can use their income in two ways. They either consume or invest the part they have not spent (savings) on investment instruments. To value the asset to be consumed or the asset to be invested is very different. We compare the price and budget that we will pay for satisfaction when we give a decision of consumption. When you buy a car at home or television, you get the product that gives you the strongest feeling of satisfaction (the highest marginal benefit) with your budget. This topic is examined in the Consumer Decisions section of the micro-economy course. Since bitcoin is defeated and there is nothing to drink, we can not pay for consumption. It is a very different matter that the savings are converted into investment. If a person opens a cookie shop or cafe around the corner with his / her own capital, he is making an investment (not consumption) because there is a return expectation after this expenditure. Investing in real estate or making deposits or buying shares in the stock market is such a decision. When valuing any investment, you discount the cash flow you expect to receive from this investment with a certain discount rate (with the rate of return you expect) and price it. Another method is the return time of the money you invest. There are multiple methods of valuing stocks.
Step-7-Is BITCOIN an investment vehicle? If you receive government bonds, you will receive interest periodic and period end. If you invest in the stock market, you will receive profit share in the future + capital gain / loss (buy-sell difference) if the stock gains value. If you buy gold, you will get 1-2% per annum as the banks will pay 1-2% interest per year + you will bring in capital gain or loss from gold. If you are trading iron, you will sell on the price you buy and you will profit. This is investment. Goldsmiths buy gold and sell, and profit from the difference. Although the price of gold rises and falls, the jeweler wins from the trade buying distinction. Therefore, profit for the jeweler is profitable.
Nakamoto, who invented BITCOIN, does not say that it is an investment instrument in any part of the article he writes, and simply states that it is an easy payment tool at a cost close to free and gives its technological structure and details. With its technological infrastructure, BitCoin is a revolution in global payment. It's a virtual currency that you can pay all over the world. Moreover, those who send money in these payments may hide themselves, but this may be a serious problem in the future. In other words, the most important feature is the ability to convert to all countries' currencies via the dollar and make payments.
BITCOIN does not have an effect. So you can not deposit your bitcoin into a bank and get interest. You may consider buying a BITCOIN for a speculative purpose (capital gain), just thinking it will increase in price. However, the basic function of BitCoin is the payment instrument. There are those who like Bitcoin. Gold is at least used in industry (in the chip production of computers) and in the jewelry industry. In the Congo forests you are a tribe of gold, and if you want to eat, they can give you food. Gold is not eaten, it is not drunk, but there is an enormous mass consuming for show. But bitcoin has no such function. Bitcoin is not an investment instrument, but a payment method.
Step-8- Misrepresentation of Bitcoin: There is only one explanation of the increase in Bitcoin's price. Only 21 million bitcoins can be printed all over the world. Up to now, 16.4 million bitcoins have been released by circulation. With "Bitcoin mining", people can build big size servers to make bitcoin transfers healthy, and they can have a bitcoin as a reward for them (they tell me what it is in the 10th minute of the video I gave above). As the price of bitcoin increased, the number of people who invested in "bitcoin mining" increased dramatically. Nakamoto who invented Bitcoin actually made a big mistake at this point. If he had spoken to a finance expert, instead of developing such a reward method (BitCoin mining), Bitcoin could share a commission with those investing in HASH processes that would provide this transfer security, in order to provide the security needed to transfer an account to another account. Normally 1 BITCOIN = 1 US dollars fixed rate, BITCOIN could be a real revolution, but what will end up BITCOIN is that the value of bitcoin is EXCLUSIVE, SPECULATIVE and VERY HIGH PRICE. The most important element that a currency to be used in mutual payments should have is İSTİKRAR. Think about it, your friend in America will send you $ 17,000. When you do this you get 1 BTC = $ 17,000. Let's say the submission took place in 5 minutes. There is a big problem here if the money goes through and if 1 BTC = $ 16,800. You may not be able to send this money in full due to extreme volatility and extremely short fluctuations. If 1 bitcoin = $ 1, it would not be such a problem and people all over the world would be able to get rid of paying high commissions in the bank and send money only in this way. So everyone opened a Bitcoin wallet. At the moment, nobody is actually asking BITCOIN to make such payments! The only reason to ask for BITCOIN is that the price is rising. But as we have said above, BITCOIN is not an investment vehicle. Bitcoin is not gold. Bitcoin is not a share. If Nakamoto had understood Briaz from finance, he would have set up a company, made 1 BTC = $ 1, and I would get the shares of this company. Even if we get a commission of ten out of a billion dollar transfer that will take place around the world, the tremendous amount of money makes money, and as the world spreads its share value has flown. We could easily calculate what the price of this stock should be. Can we value the bitcoin in this way?
Step-9- What is the price of BITCOIN? The above formulas do not apply to BTC because it is not an investment instrument and there is no effect on a certain benchmark. Let's try to make an account like this; Currently there are 16.4 million bitcoins in the world. 1 BTC = $ 17,000, the total value is $ 278.8 billion. The total exports of the world's top 20 exporting countries are around 13 trillion dollars. Let's assume that these exports are to be paid in full with BTC. In this case, if you divide 13 trillion dollars into 21 million BTC, the price of BTC may be 616 thousand dollars. Similarly, you can calculate imports or intra-country purchases with BTC. For example, in the US, the total consumption per year is 11 trillion dollars. If BTC was only being traded in the US and everyone had spent all their expenses with BTC, the value of BTC would have been $ 407,000. All of the world's consumption is 45-48 trillion dollars. If this consumption is all done with BTC and everyone does not use their credit cards, banks do not use all the consumption with BTC.
Now let's come to the podium and walk the mind instead of the cold figures. If all the consumers around the world are going to use BTC, how much will they spend with BTC for $ 45-48 trillion in total consumption? Will the total consumption of BTC in the next 10 years reach 1% of total consumption? I suppose it has arrived. In this case, 45 billion billion are divided into 21 million. That's $ 21,500. So if 1% of the world's total consumption is done with BTC, 1 BTC could be 24 thousand dollars. Now a 10-point expert question. Is 1 percent of the world's total consumption done with BTC? ANSWER ONE ARE NO. The current price is a crazy price. But the price makers at BitCoin talk about inflated prices, assuming that it will become widespread and everyone will use bitcoin in the future.
IN MY NEXT ARTICLE, I WILL EXPLAIN THE ELEMENTS THAT WILL FINISH BITCOIN.