As we continuously chase the next big opportunity in the new narrative and technological wave, perhaps the most noteworthy innovations are those that seem "simple" yet possess the most profound essence.
Written by: Liu Ye Jing Hong
Author's Note
As a practitioner in the Web3 industry for many years, I have witnessed and participated in the birth and evolution of countless new concepts, narratives, and play styles. From DeFi, NFTs, and DAOs to various public chains, side chains, and L2 solutions, the industry seems to always be chasing the latest, coolest, and most imaginative innovations.
However, amidst this ongoing wave of innovation, when I revisit the Bitcoin white paper and reflect on its design intent and economic essence, I find myself gaining many new insights. Bitcoin is undoubtedly the starting point of the entire industry and the most fundamentally revolutionary invention. Its simplicity, restraint, and algorithmically anchored trust mechanism have yet to be surpassed by later entrants.
After experiencing so many new narratives, reflecting on Bitcoin itself and re-examining its unique position in the history of monetary evolution and its future possibilities may be more meaningful than blindly chasing new trends. I hope this article can help you step away from the noise, look back at the essence, and inspire new thoughts.
Introduction
Currency is one of the most profound and consensual inventions in the progress of human civilization. From barter to metallic currency, from the gold standard to sovereign credit currency, the evolution of money has always accompanied changes in trust mechanisms, transaction efficiency, and power structures. Today, the global monetary system faces unprecedented challenges: currency over-issuance, trust crises, deteriorating sovereign debt, and geopolitical shocks caused by dollar hegemony.
The birth of Bitcoin and its expanding influence compel us to rethink: what is the essence of currency? In what form will the future "value anchor" exist?
"The revolutionary nature of Bitcoin lies not only in its technology and algorithms but also in its status as the first 'bottom-up' currency system driven spontaneously by users in human history, challenging the millennium paradigm of state-led 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 evolutionary paths for the global monetary system.
I. Historical Evolution of Currency Anchors
1. Barter and the Birth of Commodity Money
The earliest economic activities of humans primarily relied on the "barter" model, where both parties in a transaction had to possess the goods the other needed. This "double coincidence of wants" greatly limited the development of production and circulation. To solve this problem, universally accepted goods (such as shells, salt, livestock, etc.) gradually became "commodity money," laying the foundation for later precious metal currencies.
2. The Gold Standard and the Global Settlement System
As civilization progressed, gold and silver, due to their scarcity, ease of division, and resistance to alteration, became the most representative general equivalents. Ancient empires such as Egypt, Persia, Greece, and Rome used metallic currency as symbols of national power and social wealth.
By the 19th century, the gold standard was established globally, linking national currencies to gold and standardizing international trade and settlement. England officially established the gold standard in 1816, with other major economies gradually following suit. The greatest advantage of this system was the clear "anchor" of currency and low trust costs between countries, but it also resulted in currency supply being limited by gold reserves, making it difficult to support the expansion of industrialization and globalization (such as "gold shortages" and deflation crises).
3. Credit Currency and the Rise of Sovereign Credit
In the first half of the 20th century, two world wars severely impacted the gold standard system. The Bretton Woods system was established in 1944, linking the dollar to gold, with other major currencies pegged to the dollar, forming a "dollar standard." In 1971, the Nixon administration unilaterally announced the decoupling of the dollar from gold, marking the official entry of global sovereign currencies into the era of credit currency, where nations issued currency based on their own credit and managed the economy through debt expansion and monetary policy.
Credit currency brought great flexibility and economic growth potential but also sowed the seeds of trust crises, hyperinflation, and currency over-issuance. Third-world countries frequently fell into currency crises (such as Zimbabwe, Argentina, Venezuela, etc.), and even emerging economies like Greece and Egypt struggled amid debt crises and foreign exchange turmoil.
II. The Real Dilemmas 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 worldwide. Currently, about one-third of 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 following World War II but has also led to significant concentration and opacity issues.
For example, Germany once announced plans to repatriate part of its gold reserves from the U.S., citing distrust in the U.S. vault's accounts and the long-standing inability to conduct on-site audits. It is difficult for outsiders to verify whether the vault's accounts match the actual gold reserves. Additionally, the proliferation of "paper gold" derivatives has further weakened the correspondence between "account gold" and physical gold.
2. The Non-M0 Nature of Gold
In modern society, gold no longer possesses the attributes of a currency in daily circulation (M0). Individuals and businesses cannot directly settle daily transactions with gold, and it is even challenging to hold and transfer physical gold directly. The primary role of gold is more as a settlement tool between sovereign nations, a reserve for large assets, and a hedge in financial markets.
International gold settlements typically involve complex clearing processes, long time delays, and high security costs. Moreover, the transparency of inter-central bank gold transactions is extremely low, relying on the trust endorsement of centralized institutions for account verification. This makes gold's role as a global "value anchor" increasingly symbolic rather than a reflection of real circulation value.
III. The Economic Innovations and Real Limitations of Bitcoin
1. Bitcoin's "Algorithmic Anchoring" and Currency Attributes
Since its inception in 2009, Bitcoin's fixed supply, decentralization, and transparent verifiability have sparked a new wave of global thinking about "digital gold." The supply rules of Bitcoin are encoded in algorithms, with a total cap of 21 million coins that cannot be altered by anyone. This "algorithmic anchoring" scarcity is akin to the physical scarcity of gold but is more thorough and transparent in the global internet age.
All Bitcoin transactions are recorded on the blockchain, allowing anyone globally to publicly verify the ledger without relying on any centralized institution. This attribute theoretically greatly reduces the risk of "discrepancies between account and physical assets" and significantly enhances the efficiency and transparency of clearing and settlement.
2. Bitcoin's "Bottom-Up" Diffusion Path
Bitcoin fundamentally differs from traditional currencies: traditional currencies are "top-down" issued and promoted by state power, while Bitcoin is "bottom-up" adopted spontaneously by users and gradually spreads to businesses, financial institutions, and even sovereign nations.
Users lead, institutions follow: Bitcoin was initially adopted spontaneously by a group of cryptography enthusiasts and libertarians. As network effects strengthened, prices rose, and application scenarios expanded, more individuals, businesses, and even financial institutions began to hold Bitcoin assets.
States adapt passively: 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: Bitcoin's network effects transcend sovereign boundaries, with a large number of users in both developed 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 no longer entirely depends on the "approval" of states or institutions but rather on whether there are enough users and market consensus.
Insights for the Future Monetary Landscape:
The potential separation of power and currency: Currency no longer necessarily depends on state power but can belong to the internet, algorithms, and global user consensus.
State support becomes "the icing on the cake": Whether Bitcoin becomes a global currency no longer entirely depends on legislative support from state institutions; as long as there are enough users and social recognition, it can thrive.
New challenges to sovereignty: Sovereign nations may have to adapt to, or even passively accept, the impacts brought by "user-governed currencies."
Critique and Reflection:
Limitations and risks of user governance: How to manage risks such as extreme volatility, governance issues, and "black swan" events without sovereign backing?
Can "bottom-up" respond to global crises? In the face of systemic financial crises or large-scale technological attacks, is a currency system lacking central coordination more vulnerable?
Redistribution of power: Is Bitcoin truly "decentralized"? Or will new oligarchic centers emerge?
- Real Limitations and Critique
Although Bitcoin is revolutionary in theory and technology, it still faces many limitations in practical applications:
High price volatility: Bitcoin prices are 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 only process a limited number of transactions per second, with long confirmation times, and the proof-of-work mechanism consumes vast amounts of energy.
Sovereign resistance and regulatory risks: Some countries adopt negative or even repressive attitudes toward Bitcoin, leading to a fragmented global market.
Uneven wealth distribution and technical barriers: Early Bitcoin users and a few large holders control a significant amount of Bitcoin, leading to highly concentrated wealth. Additionally, ordinary users face certain technical barriers to participation, making them vulnerable to fraud and risks such as losing private keys.
IV. Bitcoin and Gold: A Thought Experiment as Future Value Anchors
1. Historical Leap in Transaction Efficiency and Transparency
In the era when gold served as a value anchor, international bulk gold transactions often required the use of planes, ships, armored vehicles, etc., for physical transfers, taking days or even weeks and incurring high transportation and insurance costs. For instance, the German central bank announced plans to repatriate gold reserves from overseas, a process that took years to complete.
More critically, the global gold reserve system suffers from severe opacity and auditing challenges. Ownership, storage locations, and actual existence of gold reserves often rely solely on unilateral statements from centralized institutions. In such a system, the trust costs between nations are extremely high, limiting the robustness of the international financial system.
Bitcoin addresses these issues in a completely different way. The ownership and transfer of Bitcoin are recorded on-chain, allowing anyone globally to verify 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 physical transfer or third-party intermediaries, with global transactions taking only minutes. This unprecedented transparency and verifiability give Bitcoin an efficiency and trust foundation in bulk settlements and value anchoring that gold cannot match.
2. The Concept of "Role Layering" for 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 serve as "cash" or M0 in reality.
However, referencing the currency layering theory of M0/M1/M2, we can envision a future monetary system with the following structure:
Bitcoin and other "anchors" serve as M1+ level value storage and bulk settlement tools, similar to the position of gold in central bank assets, but more transparent and easier to settle.
Stablecoins, layer two networks (such as the Lightning Network), and central bank digital currencies (CBDCs) based on Bitcoin undertake functions of daily payments, micropayments, and retail settlements. These "sub-currencies" are anchored to Bitcoin or issued with its backing, achieving a balance between circulation efficiency and value stability.
Bitcoin becomes a "general equivalent" and "unit of account" for social resources, widely recognized by global markets, but is not directly used for daily consumption; instead, it serves as the "ballast" of the economic system, much like gold.
This layered structure can leverage Bitcoin's scarcity and transparency as a global "value anchor," while also utilizing technological innovations to meet the convenience and low-cost demands of daily payments.
V. Possible Evolution of Future Monetary Systems and Critical Thinking
1. Multi-layered, Multi-role Currency Structure
The future monetary system is likely to no longer be dominated by a single sovereign currency but will coexist in a three-layer structure of "value anchor—payment medium—local currency," with cooperation and competition running parallel:
Value Anchor: Bitcoin (or similar digital assets) serves as a decentralized global reserve asset, fulfilling roles of cross-border settlement, central bank reserves, and value hedging as "high-level currency."
Payment Medium: Stablecoins, sovereign digital currencies, and the Lightning Network anchor to Bitcoin or sovereign currencies to facilitate daily circulation, payments, and pricing.
Local Currency: National currencies continue to perform the functions of regulating and managing local economies, achieving taxation, social welfare, and economic policy goals.
In this multi-layered structure, the three major functions of currency (medium of exchange, unit of account, and store of value) will be more clearly divided among different currencies and levels, enhancing the global economy's risk diversification and innovation capacity.
2. New Trust Mechanisms and Potential Risks
However, this new system is not without risks. Can algorithms and network consensus truly replace the credit of national sovereignty and central institutions? Will Bitcoin's decentralized characteristics be eroded by oligarchs of computing power, governance loopholes, or technological advancements? Global regulatory discrepancies, policy conflicts, and "black swan" events could all become destabilizing factors in the future monetary system.
Moreover, sovereign nations may restrict Bitcoin's expansion through strong regulation, taxation, and technological blockades to protect their own interests. Whether Bitcoin can achieve a truly global consensus and maintain its "digital gold" status in a "bottom-up" path still requires the test of time.
Conclusion and Open Questions
Looking back at the evolution of currency, from barter to the gold standard to credit currency, each replacement of "anchors" has been accompanied by profound changes in trust mechanisms and social organization. The emergence of Bitcoin has shifted the "value anchor" from physical resources and sovereign credit to algorithms, networks, and global user consensus. Its "bottom-up" diffusion model, transparent and verifiable ledger, and global network effects provide a new thought experiment for future monetary systems.
However, the road to Bitcoin's revolution is not smooth. Issues such as price volatility, governance challenges, regulatory risks, and technical barriers need urgent resolution. Whether Bitcoin can ultimately become the "value anchor" or "general equivalent" of the global monetary system depends not only on technological innovation and user consensus but also on the restructuring of global economic, social, and political frameworks.
Open Questions:
If not Bitcoin, what will be the future value anchor?
How will the ultimate trust foundation of currency evolve?
What balance will the future global value system strike among state power, user autonomy, and algorithmic governance?
As we continuously chase the next big opportunity in the new narrative and technological wave, perhaps the most noteworthy innovations are those that seem "simple" yet possess the most profound essence. Bitcoin, as a monetary experiment of the internet era, deserves our continued deep reflection.
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