Bitcoin: The Currency Experiment of the Internet Era and Future Value Anchor

Introduction

Currency is one of the most profound and consensus-driven inventions in the process of human civilization. From barter to metal 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 currency system is facing unprecedented challenges: currency overissuance, a crisis of trust, worsening sovereign debt, and geopolitical economic shocks caused by the hegemony of the US dollar.

The emergence of Bitcoin and its continuously 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 the fact that it is the first "bottom-up" currency system in human history, driven spontaneously by users, challenging the millennia-old paradigm of state-controlled currency issuance.

This article will review the historical evolution of currency anchors, analyze the dilemmas of the existing gold reserve system, examine the economic innovations and limitations of Bitcoin, explore the possibility of Bitcoin as a future value anchor, and look ahead to potential diverse evolutionary paths of the global currency system.

1. The Historical Evolution of Currency Anchors

1. The Birth of Barter and Commodity Money

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

2. Gold Standard and Global Settlement System

In the civilized society, gold and silver, due to their natural properties such as scarcity, ease of division, and difficulty in alteration, became the most representative general equivalents. Ancient empires like Egypt, Persia, Greece, and Rome used metal currency as a symbol 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 adopted the gold standard in 1816, and other major economies gradually followed suit. The greatest advantage of this system was the clear 'anchor' for the 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 the global economy (such as the 'gold shortage' and deflation crisis).

3. The Rise of Credit Money and Sovereign Credit

In the first half of the 20th century, 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 dollar, forming a "dollar standard." In 1971, the Nixon administration unilaterally announced the decoupling of the dollar from gold, officially ushering the global sovereign currencies into the era of fiat money, where countries issue currency based on their own credit and regulate the economy through debt expansion and monetary policy.

Fiat currency has brought great flexibility and room for economic growth, but it has also sown the seeds of a trust crisis, hyperinflation, and excessive money supply. Third world countries have repeatedly fallen into domestic currency crises (such as Zimbabwe, Argentina, Venezuela, etc.), and even emerging economies like Greece and Egypt are struggling in the midst of debt crises and foreign exchange turmoil.

2. The Real Dilemma of the Gold Reserve System

1. Centralization and Opacity of Gold Reserves

Although the gold standard has become a thing of the past, 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 globally 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 established in the post-World War II international financial system, but it has also led to significant issues of concentration and opacity.

For example, Germany once announced that it would repatriate part of its gold reserves from the United States, one reason being distrust of the U.S. treasury accounts and the long-standing failure to conduct an on-site audit. It is difficult for outsiders to verify whether the treasury accounts match the actual gold reserves. In addition, the proliferation of derivatives like "paper gold" has further weakened the correlation between "account 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 use gold to settle daily transactions, and it is even difficult to directly hold and transfer physical gold. The primary role of gold is more as a settlement tool between sovereign nations, a reserve for bulk assets, and a hedging instrument in financial markets.

International gold settlements typically involve complex clearing processes, long time delays, and high security costs. Moreover, the transparency of gold transactions between central banks is extremely low, and the auditing relies on the trust endorsement of centralized institutions. This makes gold's role as a global "value anchor" increasingly symbolic rather than a reflection of its actual circulation value.

3. The Economic Innovation and Real Limitations of Bitcoin

1. The "algorithm anchoring" of Bitcoin and its currency attributes

Since the birth of Bitcoin in 2009, its characteristics of a fixed total supply, decentralization, and transparency have triggered a new round of thinking about "digital gold" globally. The supply rules of Bitcoin are encoded in algorithms, and the total supply cap of 21 million coins cannot be changed by anyone. This "algorithmically anchored" scarcity is similar to the physical scarcity of gold, but it is 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 property theoretically greatly reduces the risk of "discrepancies between the books and the physical assets" and significantly improves the efficiency and transparency of clearing and settlement.

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

Bitcoin fundamentally differs from traditional currencies: traditional currencies are issued and promoted "top-down" by state authority, whereas Bitcoin is adopted spontaneously by users "bottom-up" 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 the network effect strengthened, prices rose, and application scenarios expanded, more and more individuals, businesses, and even financial institutions began to hold Bitcoin assets.

Passive adaptation by 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 transcended 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 nations or institutions, but rather on whether there are enough users and market consensus.

Insights into the future currency landscape:

• Currency is no longer necessarily attached to national power, but can belong to the internet, algorithms, and global user consensus.
• Whether Bitcoin becomes a global currency no longer entirely depends on the legislative support of national institutions, as long as there are enough users and social recognition.
• Sovereign nations may have to adapt in the future, or even passively accept the impact brought by "user-governed currencies."

Limitations and Risks of User Autonomy: How to manage risks such as extreme volatility, governance issues, and "black swan" events in the absence of sovereign backing?

Can a "bottom-up" approach cope with global crises? When facing systemic financial crises or large-scale technological attacks, is a currency system lacking central coordination more fragile?

Redistribution of power: Has Bitcoin really become "decentralized"? Or will new oligarchic centers emerge?

3. Realistic limitations and criticism

Although Bitcoin has revolutionary potential in theory and technology, there are still many limitations in its real-world application:

• 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 has a limited number of transactions it can process per second, long confirmation times, 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.
• Uneven wealth distribution and technical barriers: Early Bitcoin users and a small number of large holders control a significant amount of Bitcoin, resulting in highly concentrated wealth. Additionally, ordinary users face certain technical barriers to participation and are susceptible to risks such as fraud and loss of private keys.

4. Similarities and Differences Between Bitcoin and Gold: A Thought Experiment as Future Value Anchors

1. The historical leap in 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 several 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.

Moreover, it is crucial that there are serious issues of accounting transparency and counting difficulties in the global gold reserve system. The ownership, storage location, and actual existence status of gold reserves often rely solely on unilateral statements from centralized institutions. In such a system, the trust cost between countries is extremely high, and the stability 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 countries, as long as one possesses the private key, they can allocate funds at any time without physical transfer or third-party intermediaries, with global transactions taking only a few minutes. This unprecedented level of transparency and verifiability gives Bitcoin an efficiency and trust foundation in bulk settlements and value anchoring that gold cannot match.

2. The "Role Layering" Concept of Value Anchors

Although Bitcoin far surpasses 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 for it to become "cash" or M0 in reality.

However, referring to the monetary hierarchy theory such as M0/M1/M2, one can envision the future currency system having the following structure:

• Bitcoin and other "anchor assets" serve as M1+ level value reserves and bulk settlement tools, similar to the position of gold in central bank assets, but are more transparent and easier to settle.
• Stablecoins based on Bitcoin, layer two 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 backed by it, achieving a unity of circulation efficiency and value stability.
• Bitcoin has become a "general equivalent" and "measuring unit" of social resources, widely recognized by the global market, but is not directly used for daily consumption; rather, it serves as the "ballast" of the economic system, much like gold.

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

V. Possible Evolution of Future Monetary Systems and Critical Thinking

1. Multi-level, multi-role currency structure

The future currency system is likely to no longer be dominated by a single sovereign currency, but rather a coexistence of three layers: "value anchor - payment medium - local currency", where cooperation and competition run parallel.

• Value anchor: Bitcoin (or similar digital assets) serves as a decentralized global reserve asset, undertaking the role of "higher currency" for cross-border settlement, central bank reserves, and value hedging.
• Payment mediums: stablecoins, sovereign digital currencies, lightning networks, etc., anchored to Bitcoin or sovereign currencies, achieving daily circulation, payment, and pricing.
• Local currency: The currencies of various countries continue to play the role of regulating and managing the local economy, achieving tax, social welfare, and economic policy objectives.

Under this multi-layered structure, the three major functions of currency (medium of exchange, measure of value, store of value) will be more clearly divided among the different layers.