Note: Yi Kelun, president of Corporate Strategy Institute of Anshan city, Anhui province of China, talks about the difference between virtual economy and false economy.
Virtual economy is operated on the basis of real economy. A stone can be as precious as a pearl if Taylor Swift writes a song about it hailing there is something special about it.
Let’s start with a story.
Long long ago, in a small, isolated village Utopia, there was a poor boy named Peter. One day, when lying on the grass, Peter smelled something so sweet and so swooning. He followed the smell and happened to find an apple tree. He picked an apple and ate it. It was so succulent, so divine. It tasted like nothing he had before. He realized it was a brilliant business opportunity.
He picked more apples and went to the neighbor village Dystopia. At the very beginning, he sold per apple at the price of one dollar. As the smelling was so inviting, people would like to spend some little money to have a bite of it. It was the best apple they had ever had. More people came to him and thus drove up the price.
The apple had become a shining star. A growing number of businessmen wanted to be part of it. They asked Peter how to invest money so as to plant this kind of apple on a large scale. They wanted big money.
Peter went home, followed by investors. Villagers had no idea what they came for, but they were happy when those fortune-seekers offered much price to rent land and grow apple trees.
In the following years, Peter and those investors harvested apples in Utopia and then sold them to people in Dystopia. Now Peter got rich. He bought a warm house, he bought a nice car. His neighbors, however, remained poor and they were jealous. But the time was still young. They followed Peter’s footsteps and started to grow apple trees. As a result, apple price kept rising, so as the land price.
Three years later, everywhere around the village was covered with apple trees. Villagers were tirelessly transporting apples from Utopia to Dystopia. But no one felt anything special about the apple any more. As a result of oversupply, apple price was falling down.
Peter and those investors moved to another place. They would find a way to start it over again.
Those villagers, however, didn’t make any money and all they had now were rotten apples all over the ground.
The apple bubble blasted, only few made a big fortune. Most people both in the Utopia and Dystopia fell victims to the bubble.
Living in the age of the Internet, false economy takes many different forms. First, you see game currencies, and then digital currencies like bitcoin.
One thing we are clear is that the value produced in virtual economy is like castles in the air. You know it is there, but you just can’t touch it.
Virtual economy and false economy are risky in different ways. A bubble in virtual economy leaves you with real things, like apples in Utopia and they may be used for something else, such as jam.
False economy, however, is like a fairytale. It’s a story of “the prince and the princess live happily forever”, which is rare in real world.
When I asked some of my friends why they think bitcoin is a good investment, they told me that they use Bitcoin as a store of value to escape their own highly inflating currency.
There are 21 million bitcoins in total and 13 million have been mined, the rest 8million bitcoins are supposed to be mined out in 100 years. it seems that bitcoin is immune to inflation. But the problem is that as the internet keeps evolving, I believe that cryptocurrencies that is more complex will be designed.
By that time, there will be thousands of digital currencies. and no one will buy bitcoins anymore.
Plus, cryptocurrencies are disrupting the financial systems and international financial institutions will partner to fight the cryptocurrency market.
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