When meeting someone for the first time in the currency circle, the most common question is "How to jump down the rabbit hole." The allusion comes from the 1865 classic children's novel Alice's Adventures in Wonderland by Lewis Carroll. (Silk's Adventures in Wonderland), the first chapter of which is "Down the Rabbit Hole", which was later extended to metaphorically fall into a world of inverted logic unconsciously, and lead a completely different life from then on.

Bitcoin-based, explained in vernacular, means looking at the world based on Bitcoin. This seems to explain it, but it doesn't seem to say anything. At best, it just expands on the literal meaning, and those who don't understand it continue to not understand it. My own experience tells me that the reason why Bitcoin is difficult to understand is not because the concept is difficult, but because it is completely contrary to the logic we have internalized over the years, so that it makes people feel like they are fighting against reflex nerves, which feels extremely unnatural. Therefore, The deeper people get into the traditional system, the less they understand the Bitcoin standard.

Now, let us once again invite two old friends, the US dollar (America) standard Alice and the Bitcoin (Bitcoin) standard Bob, to substitute their respective To understand different aspects of investment from different perspectives, you can appreciate the Bitcoin-based world view, experience Alice in Wonderland, and how logic is turned upside down after falling into the Bitcoin rabbit hole.

Picture: British Library public domain

1. Settlement Alice: Bank The monthly statement converts assets such as foreign exchange, funds, and stocks into U.S. dollars, and the exchange compiles the total U.S. dollar value of Bitcoin, Ethereum, etc., and Alice calculates the total value of her assets.

Bob: Convert U.S. dollars and a small number of foreign exchange, funds, stocks and other assets into Bitcoin at the end of each month, plus the total amount of cryptocurrency assets denominated in Bitcoin, Bob finds the total value of his assets.

If you intend to implement the Bitcoin standard, settling in Bitcoin is the basic step. If you can’t even figure out how many Bitcoins your assets are, it’s impossible to talk about the Bitcoin standard.

2. Buying and Selling

Alice: When the asset exists in the form of US dollars, it means parking, that is, there is no investment. When Alice is optimistic about the potential of X, she will "buy X", that is, exchange U.S. dollars forwill sell X, that is, convert X back into U.S. dollars.

Bob: When an asset exists in the form of Bitcoin, it means parking, that is, there is no investment. When Bob is optimistic about the potential of X, he will buy X, that is, exchange X with Bitcoin; when he withdraws from an investment, he will sell

I once recommended buying 0.001 BTC USD every day in "Bitcoin breaks all-time high, five things to remember in the bull market". A reader kindly reminded me that I made a mistake. ; No, that was not a typo, I meant exactly buying USD in BTC every day. I’m not being hypocritical when I write this. In terms of numbers, this is indeed the same as selling 0.001 BTC every day, but the mentality is exactly the opposite, using the logic of the rabbit hole. From Bob's point of view, it is not that the price of BTC is high so he sells it, but that the price of the US dollar is very low so he buys it. After it appreciates, he sells it to get back the Bitcoin and make money.

3. Quotation

Alice: Quote in US dollars. In Alice's eyes, 1 BTC = 100,000 USD, 1 ETH = 4,000 USD, 1 AAPL = 169 USD, and a Tesla Model 3 sells for 40,000 USD; Alice occasionally uses Coinmarketcap to check currency prices, and chooses US dollars to display the prices of various cryptocurrencies. price.

Bob: Quote in Bitcoin. In Bob's eyes, 1 USD = 0.000014 BTC, 1 ETH = 0.052 BTC, 1 AAPL = 0.0024 BTC, and a Tesla Model 3 sells for 0.557 BTC; Bob often uses Coinmarketcap to check currency prices, and chooses Bitcoin to display various cryptocurrencies. price. Just like Americans check the price of foreign currencies against the US dollar, Bitcoin is the legal currency in Bob's mind, and altcoins are foreign currencies; sometimes he converts some Bitcoins into altcoins because he is optimistic about its potential, and sometimes because he needs to use this " foreign currency". In addition, Bob will also use Fiatmarketcap to check the prices of more than 100 legal currencies in the world. For example, the market value of RMB is 584,862,949 BTC, and the current price of 1 RMB is 195 sats, which is 0.00000195 BTC.

One ​​of the reasons why the Bitcoin standard is so difficult to implement is that the currency is quoted not by individuals but by societyDominated by the US dollar quotation being the mainstream in the world, practicing the Bitcoin standard requires constant conversion in the mind, just like foreign tourists looking at McDonald’s menu and having to convert it back to the standard legal currency before they can understand how much a hamburger costs. Different from Taiwan and Hong Kong, the legal currency has a relatively fixed exchange rate with the US dollar, and the order of magnitude is small. For example, 1 US dollar is exchanged for about 8 Hong Kong dollars or 30 Taiwan dollars. It is difficult to quote the price when converting into Bitcoin without using a computer. It is like when traveling to Vietnam, you need to check the price. Multiply by 0.00004 to convert to U.S. dollars, greatly raising the mental accounting barrier.

4. Profit and Loss

Alice: Using U.S. dollars as the coordinate; "Making money" means that after converting assets into U.S. dollars, the U.S. dollars on hand increase. For example, 4 years ago, 67 Magnesium bought AAPL and sold it at 169 magnesium today, making a profit of 152%; another example is that 4 years ago, I bought ETH at 173 magnesium and sold it today at 3,644 magnesium, making a profit of 2,000%. Although Alice sometimes converts USD into other assets, the investment goal is to increase the number of USD on hand in the long run (what a nonsense), so the assets are converted back to USD when harvesting.

Bob: Taking Bitcoin as the coordinate; "Making money" means that after converting assets into Bitcoin, the number of Bitcoins on hand increases. If Bob and Alice make the same investment decision, they buy AAPL for 0.0091 BTC 4 years ago and sell AAPL for 0.0024 BTC today, which is a huge loss of 74%; they buy ETH for 0.024 BTC 4 years ago and sell it for 0.052 today. ETH is a small profit of 116%. Although Bob sometimes exchanges Bitcoin for other assets, the investment goal is to increase the number of Bitcoins on hand in the long run (no nonsense), so the assets will always be exchanged back for Bitcoin when harvesting.

If Bob's logic is too difficult to accept, you can compare the logic commonly used by stock investors, the Hang Seng Index standard. Assume that Carol bought electricity at 34.1 HKD during SARS in 2003 and sold it at 62.3 HKD today, making a profit of 83% in Hong Kong dollar terms (dividends during the period are ignored for simplicity, although in fact they should be taken into account); however, during the same period, the Hang Seng Index went from 8,579 points rose to 16,854 today, an increase of 96%. Therefore, based on the Hang Seng Index, this investment lost 14%.

5. Mood

Alice: Bitcoin broke through a new all-time high in early March, and the prices of cryptocurrencies led by Bitcoin have generally increased significantly. At the end of 2023, the BTC price is 40,000 USD, and Alice holds 1BTC and 80,000 USD, the total asset value is 120,000 USD; the current BTC price has risen to 70,000 USD, Alice's total asset value has risen to 150,000 USD, earning 25%. Alice regrets not buying more Bitcoin at the end of last year and missing out on Bitcoin’s rise during this period.

Bob: The U.S. dollar fell below a record low in early March, and the overall price of legal currencies led by the U.S. dollar fell significantly. At the end of 2023, the US dollar price was 0.000025 BTC. Bob held 1 BTC and 80,000 USD, with a total asset value of 3 BTC; now the US dollar price dropped to 0.000014 BTC, and Bob’s total asset value dropped to 2.14 BTC, a loss of 29%. Bob regretted not selling the U.S. dollar at the end of last year and could not avoid the decline of the U.S. dollar during this period.

The big bulls in the currency market are losing money instead. Is this logic becoming more and more difficult to accept? Please think a little deeper. When you think that cryptocurrencies will enter the bull market in 2024, you are looking at the world from the US dollar standard. In fact, for Bob, who is Bitcoin standard, legal currency will enter the bear market from 2024. Hold The more U.S. dollars, the greater the loss. This is an intuitive arithmetic. I believe that holding U.S. dollars has no risk. At most, it will just miss the opportunity to make money, all because they forget that they are based on the U.S. dollar.

In the final analysis, "X-centeredness means that our entire life is surrounded by X without realizing it."

Finally, Bitcoin is a rabbit hole. Falling into the pit all of a sudden, making you dizzy and doubting life is normal. Let us stop for now and let Alice digest it first. Take a moment, and come back later to talk about how Bitcoin-based Bob was created.