The Evolution of Currency and the Bitcoin Revolution: Rethinking the Future of Value Anchors

Introduction

Currency is one of the most profound and consensual inventions in the process of human civilization. From barter to metallic currency, from the gold standard to sovereign credit currency, the evolution of currency has always been accompanied by changes in trust mechanisms, transaction efficiency, and power structures. Today, the global monetary system is facing unprecedented challenges: excessive currency issuance, a crisis of trust, worsening sovereign debt, and geopolitical shocks triggered by the dominance of the US dollar.

The birth of Bitcoin and its continuing expanding influence compel us to rethink: what is the essence of currency? In what form will the future "value anchor" exist?

The revolution of Bitcoin lies not only in its technology and algorithms but also in its role as the first "bottom-up" currency system driven spontaneously by users in human history, challenging the millennia-old paradigm of state-dominated currency issuance.

This article will review the historical evolution of currency anchors, critique the dilemmas of the current gold reserve system, analyze the economic innovations and limitations of Bitcoin, explore the thought experiment of Bitcoin as a future value anchor, and look forward to possible diverse evolution paths of the global monetary system.

1. The Historical Evolution of Currency Anchors

1. The Birth of Barter and Commodity Money

The earliest economic activities of humanity primarily relied on the "barter" model, where both parties in the transaction had to possess exactly the items needed by the other, and this "coincidence of double demand" greatly limited the development of production and circulation. To solve this problem, universally accepted value commodities such as shells, salt, livestock, and ( gradually became "commodity money," laying the foundation for later precious metal currencies.

) 2. Gold Standard and Global Settlement System

Entering a civilized society, gold and silver have become the most representative general equivalents due to their natural properties such as scarcity, ease of division, and difficulty to tamper with. Ancient empires like Egypt, Persia, Greece, and Rome all used metallic currency as symbols of national power and social wealth.

By the 19th century, the gold standard was established globally, with national currencies linked to gold, achieving standardization in international trade and settlement. England officially established the gold standard in 1816, and other major economies gradually followed suit. The greatest advantage of this system is that the "anchor" of currency is clear and the trust costs between countries are low, but it also led to the supply of currency being limited by gold reserves, making it difficult to support the expansion of industrialization and the global economy, as seen in the "gold rush" and deflation crises.

3. The Rise of Credit Currency and Sovereign Credit

In the first half of the 20th century, the two World Wars completely impacted the gold standard system. In 1944, the Bretton Woods system was established, linking the US dollar to gold, while other major currencies were linked to the US dollar, forming a "dollar standard." In 1971, the Nixon administration unilaterally announced the decoupling of the dollar from gold, officially ushering global sovereign currencies into the era of fiat currency, where countries issued currency based on their own credit and regulated the economy through debt expansion and monetary policy.

Fiat currency has brought great flexibility and economic growth potential, but it has also sown the seeds of trust crises, hyperinflation, and excessive currency issuance. Third world countries repeatedly fall into local currency crises ( such as Zimbabwe, Argentina, and Venezuela ). Even emerging economies like Greece and Egypt are struggling amidst debt crises and foreign exchange turmoil.

II. The Real Dilemma of the Gold Reserve System

1. Concentration and Opacity of Gold Reserves

Although the gold standard has become history, gold remains an important reserve asset on the balance sheets of central banks around the world. Currently, about one-third of the official gold reserves are stored in the vaults of the Federal Reserve Bank of New York. This arrangement stems from the trust in the U.S. economy and military security in the post-World War II international financial system, but it has also led to significant concentration and transparency issues.

For example, Germany once announced that it would repatriate part of its gold reserves from the United States, one reason being distrust in the U.S. Treasury's accounts and the long inability to conduct a physical audit. It is difficult for outsiders to verify whether the treasury accounts match the actual gold reserves. In addition, the proliferation of derivatives such as "paper gold" has further weakened the correlation between "book gold" and physical gold.

( 2. The non-M0 attribute of gold

In modern society, gold no longer possesses the attributes of a daily circulating currency )M0###. Individuals and businesses cannot directly settle daily transactions with gold, and it is even difficult to directly hold and transfer physical gold. The main role of gold is more as a settlement between sovereign countries, a reserve for large assets, and a hedging tool in the financial market.

International gold settlement typically involves complex clearing processes, long time delays, and high security costs. Moreover, the transparency of gold trading between central banks is extremely low, and account audits rely on the trust endorsement of centralized institutions. This makes the role of gold as a global "value anchor" increasingly symbolic rather than a reflection of real circulating value.

3. The Economic Innovations and Real Limitations of Bitcoin

1. Bitcoin's "algorithmic anchoring" and currency attributes

Since its inception in 2009, Bitcoin has sparked a new round of thinking about "digital gold" globally due to its fixed total supply, decentralization, and transparent verifiability. The supply rules of Bitcoin are embedded in the algorithm, and the total cap of 21 million coins cannot be altered by anyone. This "algorithmically anchored" scarcity is similar to the physical scarcity of gold, but is even more thorough and transparent in the era of the global internet.

All Bitcoin transactions are recorded on the blockchain, and anyone in the world can publicly verify the ledger without relying on any centralized institution. This attribute theoretically greatly reduces the risk of "discrepancy between the ledger and the physical" and significantly enhances the efficiency and transparency of clearing and settlement.

( 2. The "bottom-up" diffusion path of Bitcoin

Bitcoin differs fundamentally from traditional currencies: traditional currencies are "top-down" issued and promoted by state power, while Bitcoin is "bottom-up" spontaneously adopted by users and gradually spreads to businesses, financial institutions, and even sovereign nations.

• Users first, institutions later: Bitcoin was initially adopted spontaneously by a group of cryptography enthusiasts and libertarians. As network effects strengthened, prices rose, and application scenarios expanded, more and more individuals, businesses, and even financial institutions began to hold Bitcoin assets.

• Passive adaptation of countries: Some countries have designated Bitcoin as legal tender, while others have approved Bitcoin-related financial products, allowing institutions and the public to participate in the Bitcoin market through compliant channels. The user base and market acceptance of Bitcoin have driven sovereign nations to passively embrace this new form of currency.

• Global borderless expansion: The network effect of Bitcoin has broken through sovereign boundaries, with a large number of users in both developed countries and emerging markets spontaneously adopting Bitcoin in their daily lives, asset reserves, and cross-border transfers.

This historic shift indicates that whether Bitcoin can become a global currency is no longer entirely dependent on the "approval" of countries or institutions, but rather on whether there are enough users and market consensus.

Insights into the Future Currency Landscape:

• The potential for the separation of power and currency: currency is no longer necessarily tied to state power, but can belong to the internet, algorithms, and global user consensus.

• National support has become "a nice addition": whether Bitcoin becomes a global currency no longer solely depends on the legislative support of national institutions, as long as there are enough users and social recognition.

• New Sovereign Challenges: Sovereign states may have to adapt to, or even passively accept, the impact brought by "user-governed currencies" in the future.

) 3. Realistic Limitations and Critique

Although Bitcoin has revolutionary qualities in theory and technology, there are still many limitations in practical applications:

• High price volatility: The price of Bitcoin is highly susceptible to market sentiment, policy news, and liquidity shocks, with short-term fluctuations far exceeding those of sovereign currencies.

• Low transaction efficiency and high energy consumption: The Bitcoin blockchain can process a limited number of transactions per second, has a long confirmation time, and the proof-of-work mechanism consumes a large amount of energy.

• Sovereign resistance and regulatory risks: Some countries adopt a negative or even suppressive attitude towards Bitcoin, leading to a fragmentation of the global market.

• Unequal distribution of wealth and technical barriers: Early Bitcoin users and a few large holders control a significant amount of Bitcoin, leading to a high concentration of wealth. Additionally, ordinary users face certain technical barriers to participation, making them vulnerable to risks such as fraud and loss of private keys.

4. The Similarities and Differences Between Bitcoin and Gold: A Thought Experiment as a Future Value Anchor

1. The Historical Leap of Transaction Efficiency and Transparency

In the era where gold serves as a value anchor, international bulk gold transactions often require the use of airplanes, ships, armored vehicles, and other means for physical transfer, which not only takes days or even weeks but also incurs high transportation and insurance costs. For example, the German central bank once announced that it would repatriate its gold reserves from overseas, and the entire plan took several years to complete.

More critically, the global gold reserve system suffers from severe accounting opacity and difficulties in inventory verification. The ownership, storage locations, and actual existence status of gold reserves often rely solely on unilateral declarations from centralized institutions. In such a system, the trust costs between countries are extremely high, and the robustness of the international financial system is constrained.

Bitcoin addresses these issues in a completely different way. The ownership and transfer of Bitcoin are recorded on-chain throughout the entire process, allowing anyone in the world to verify it in real-time and publicly. Whether individuals, businesses, or nations, as long as they possess the private key, they can allocate funds at any time without the need for physical transfer or third-party intermediaries, with global settlement taking only a few minutes. This unprecedented level of transparency and verifiability gives Bitcoin an efficiency and trust foundation in large-scale settlements and value anchoring that gold cannot match.

2. The "Role Layering" Concept of Value Anchors

Although Bitcoin far exceeds gold in terms of transparency and transfer efficiency, it still faces many limitations in daily payments and small-scale circulation — issues such as transaction speed, fees, and price volatility make it difficult to become "cash" or M0 in reality.

However, referring to the monetary hierarchy theory of M0/M1/M2, one can envision the future monetary system exhibiting the following structure:

• Bitcoin and other "anchor assets" serve as value storage and bulk settlement tools at the M1+ level, similar to the position of gold in central bank assets, but more transparent and easier to clear.

• Stablecoins based on Bitcoin, layer 2 networks ### such as the Lightning Network ###, sovereign digital currencies ### CBDC (, etc., undertake functions of daily payments, micropayments, and retail settlements. These "sub-coins" are anchored to Bitcoin or issued collateralized by it, achieving a unity of circulation efficiency and value stability.

• Bitcoin has become the "general equivalent" and "measuring unit" of social resources, widely recognized by the global market, yet it is not directly used for everyday consumption, but rather serves as the "ballast" of the economic system, similar to gold.

This layered structure not only leverages the scarcity and transparency of Bitcoin as a global "value anchor", but also utilizes technological innovation to meet the convenience and low-cost requirements of daily payments.

5. Possible Evolution of Future Currency Systems and Critical Thinking

) 1. Multi-level, multi-role currency structure

The future monetary system is likely to no longer be dominated by a single sovereign currency, but rather coexist with three layers: "value anchor - payment medium - local currency", where cooperation and competition occur simultaneously.

• Value anchor: Bitcoin ( or similar digital assets ) serve as decentralized global reserve assets, taking on the role of "high-level currency" for cross-border settlements, central bank reserves, value hedging, and more.

• Payment mediums: stablecoins, sovereign digital currencies, Lightning Network, etc., anchored to Bitcoin or sovereign currencies, to achieve daily circulation, payment, and pricing.

• Local currency: The local currencies of various countries continue to perform the functions of adjusting and managing the local economy, achieving goals related to taxation, social welfare, and economic policies.

Under this multi-layered structure, the three major functions of currency ### as a medium of exchange, unit of value, and store of value ( will be more clearly divided among different coins and levels, and the risk diversification and innovative capacity of the global economy will also be enhanced.

) 2. New Trust Mechanisms and Potential Risks

But this new system is not without risks. Can algorithms and network consensus really replace the credit of national sovereignty and central institutions? Will the decentralized characteristics of Bitcoin be undermined by power monopolies and protocol governance?