* * * Original: Liu Jiaolian * * *
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Bitcoin continues to hover above 29k overnight. If nothing else, the Federal Reserve's July interest rate meeting should begin. We should be able to know the result tomorrow. It is time for the market to make a choice.
When it comes to digital currency, you will talk about seigniorage. The English word for this is Seigniorage, derived from the French word for feudal lord or prince. The meaning refers to a kind of income obtained by minting currency, that is, the difference between the face value of the currency and the cost of minting the coin. For example, if 1 dollar is printed on a piece of paper with a comprehensive cost of 1 cent, the seigniorage is 99 cents.
Seigniorage is not a tax, but a special interest, a special benefit obtained by issuing currency.
If you produce an ordinary commodity, its price is roughly determined by the balance between society's supply capacity and overall consumer demand. But when this commodity is used as a widely used medium of exchange and store of value, people will want to keep a little for trading, or try to store it for a rainy day, so its demand will greatly increase and hoarding shrinks its supply, so that its value will greatly exceed its equilibrium price as an ordinary commodity. The cost of production is less than the equilibrium price, so it will be lower. The rising price, minus the low cost, made a little more profit in addition to the profit margin of the original ordinary commodity.
If it is paper currency, the cost is lower. It has been found that it seems possible to strip utility value from its added value, leaving only exchange value and store of value functions, that is, to become pure money. But our economists are still assiduously telling a wrong cognition that the value of money must start from practical value.
When the U.S. government issues bonds to the market through the Treasury Department and the Federal Reserve absorbs debts through the market, the issuance of dollars is completed. Just type a few numbers on the keyboard, and trillions of dollars will be issued. In 2020, the Federal Reserve released nearly one-fifth of the total number of US dollars issued by the United States in the past 200 years to the market in one year. (2020.12.5 Liu Jiaolian "Bitcoin's next bull market will be built on the ruins of US dollar inflation" )
In this debt-based currency issuance method, whoever is in debt and gets fresh dollars will benefit first and enjoy the excess value brought by the seigniorage.
Well, in our country, the finance cannot directly borrow in this way to let the central bank print money through quantitative easing. Which group is borrowing on a large scale, which group will get fresh money, benefit first, and enjoy seigniorage. Over the past few decades, the housing market has enjoyed this special benefit.
You go for a loan to buy a house. The bank will use the mortgaged real estate as the asset side, and directly issue new money on the liability side of the balance sheet to the real estate developer. You are acting as the material for the bank to create currency, but the additional money is divided up by the developers and the upstream and downstream of the relevant industrial chain.
Altcoins create new quasi-currencies through stories or low-cost pledges. The project party directly reserves most of the initial currency with almost zero cost for free, and then issues it to the market, thereby extracting a large amount of excess from the market. seigniorage. For example, if a token is $1, 10 billion tokens are issued, and 10% goes to the project party and VC, then they will directly enjoy the seigniorage of $1 billion.
The gold industry is a huge consumption industry. Gold mines have to pay a huge cost, and at the cost of expensive environmental pollution, to extract gold from the earth's crust. Therefore, gold mining companies enjoy seigniorage, but they only have meager profits after deducting high costs from the market price of gold.
Bitcoin is different from U.S. dollars, real estate, and altcoins. It is a bit similar to gold. It is issued directly to miners through expensive "mining", so that miners can reap seigniorage. The mining cost of Bitcoin can usually account for 50%-100% of the market price of Bitcoin, so the seigniorage of Bitcoin is used as a reward, which is directly given to those who help the Bitcoin system, and it is sometimes rich and sometimes meager. Full of brutal market competition and elimination.
In addition, the income of Bitcoin miners actually has two parts, one part is the newly issued Bitcoins per block, and the other part is the handling fee paid by the transactions packaged in the block. The second part is free market-priced transaction service revenue, excluding seigniorage. Only the first part of the new issuance includes seigniorage.
As Satoshi Nakamoto said many years ago, money "has to be issued somehow". It's just that, between methods, some are relatively fairer, and some are not so fair.
* * * Produced by Liu Jiaolian * * *
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(Disclaimer: The content of this article does not constitute any investment advice. Cryptocurrency is a very high-risk product, and there is a risk of zeroing at any time. Please participate carefully and be responsible for yourself.)