The Evolution of Currency Anchors and the Future Possibilities of Bitcoin

Currency is one of the most profound and consensual 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 accompanied the changes in trust mechanisms, transaction efficiency, and power structures. Today, the global monetary system is facing unprecedented challenges, including excessive currency issuance, a crisis of trust, worsening sovereign debt, and geopolitical economic turmoil triggered by the hegemony of the US dollar.

The emergence of Bitcoin and its increasingly expanding influence prompts us to rethink the essence of currency and the form of future "value anchors". As the first "bottom-up" monetary system driven spontaneously by users in human history, Bitcoin is challenging the millennium paradigm of state-led currency issuance.

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. To solve the problem of the "double coincidence of wants" in transactions, commodities 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

Entering a civilized society, gold and silver have become the most representative general equivalents due to their scarcity, divisibility, and difficulty to tamper with. Ancient empires generally used metal currency as a symbol of national power and social wealth.

In the 19th century, the gold standard was established globally, linking the currencies of various countries to gold, which standardized international trade and settlement. The advantages of this system were the clear "anchor" for currency and low cross-border trust costs, but it also led to a restriction on money supply due to limited gold reserves, making it difficult to support the expansion of industrialization and globalization.

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, forming the "dollar standard". After the dollar was detached from gold in 1971, global sovereign currencies formally entered the era of fiat money, with countries issuing currency based on their own credit and regulating the economy through debt expansion and monetary policy.

Fiat currency has brought significant flexibility and economic growth potential, but it has also sown the seeds of a trust crisis, rampant inflation, and excessive currency issuance. Many countries are struggling in the midst of debt crises and foreign exchange turmoil.

2. The Real Dilemma of the Gold Reserve System

1. The 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. Approximately 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 after World War II, but it has also led to significant concentration and opacity issues.

For example, Germany announced that it would repatriate part of its gold reserves from the United States, partly due to distrust in the U.S. Treasury's accounts and the long-standing failure to conduct on-site audits. It is difficult for outsiders to verify whether the treasury accounts match the actual gold reserves. Furthermore, the proliferation of "paper gold" derivatives has further weakened the correlation between "book gold" and physical gold.

2. The non-M0 attribute of gold

In modern society, gold no longer has the attributes of everyday currency (M0). Individuals and businesses are unable to settle their day-to-day transactions directly with gold, or even to hold and transfer physical gold directly. Gold is mainly used as a settlement between sovereign states, a reserve of bulk assets and a hedging tool in financial markets.

International gold settlement often involves complex clearing processes, long time delays, and high security costs. The transparency of intercentral bank gold transactions is extremely low, and account verification relies on the trust endorsement of centralized institutions. This makes gold's role as a global "value anchor" increasingly symbolic rather than reflecting real circulation value.

3. The Economic Innovations and Real Limitations of Bitcoin

1. The "algorithmic anchoring" of Bitcoin and its monetary 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 encoded in algorithms, with a total cap of 21 million coins that no one can change. This "algorithmically anchored" scarcity is similar to the physical scarcity of gold, but 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 feature theoretically greatly reduces the risk of "discrepancy between the ledger and the physical asset" and significantly enhances the efficiency and transparency of settlement.

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

The fundamental difference between Bitcoin and traditional currencies is that it is "bottom-up" adopted spontaneously by users and gradually spreads to businesses, financial institutions, and even sovereign nations. This diffusion model 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.

This historic transition has implications for the future monetary landscape, including: the potential separation of currency from national power; state support becoming "the icing on the cake"; sovereign states possibly being forced to adapt to the shocks brought by "user-governed currency." However, this model also faces numerous challenges, such as management issues related to extreme volatility, governance dilemmas, risks from "black swan" events, and vulnerabilities during systemic financial crises or large-scale technological attacks.

3. Realistic Limitations and Critique

Despite the revolutionary nature of Bitcoin on theoretical and technical levels, there are still many limitations in its real-world applications:

• Price volatility is high and easily affected by market sentiment, policy news, and liquidity shocks.
• Low transaction efficiency, high energy consumption, limited number of transactions processed per second, and long confirmation time.
• Facing sovereign resistance and regulatory risks, leading to a fragmentation of the global market.
• Uneven distribution of wealth and high technical barriers, early users and a few large holders control a large amount of Bitcoin, ordinary users need certain technical knowledge to participate.

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

1. The Historical Leap in Transaction Efficiency and Transparency

Compared to gold, Bitcoin has achieved a historic leap in trading efficiency and transparency. International bulk gold transactions often require complex physical transfer processes, which are time-consuming and costly. In contrast, the ownership and transfer of Bitcoin are recorded on-chain throughout the process, globally verifiable in real-time, without the need for physical transfer or third-party intermediaries, greatly enhancing settlement efficiency and trust.

2. The "Role Hierarchy" 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 transactions. In the future, a currency hierarchy structure may emerge as follows:

• Bitcoin and other "anchor assets" serve as M1+ level value storage and major settlement tools.
• Stablecoins based on Bitcoin, layer two networks, and sovereign digital currencies carry out daily payment functions.
• Bitcoin has become a "general equivalent" and "unit of account" of social resources, but is not directly used for everyday consumption.

This layered structure can leverage the scarcity and transparency of Bitcoin as a global "value anchor," while also meeting the convenience and low-cost demands of everyday payments.

V. Possible Evolution of Future Monetary Systems and Critical Thinking

1. Multi-level, multi-role currency structure

The future currency system may present a pattern of three layers coexisting: "value anchor - payment medium - local currency:"

• Value Anchor: Bitcoin (or similar digital assets) as a decentralized global reserve asset.
• Payment mediums: stablecoins, sovereign digital currencies, Lightning Network, etc. enable daily circulation and payments.
• Local currency: The local currencies of various countries continue to play a role in the adjustment and management of the local economy.

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

2. New Trust Mechanism and Potential Risks

The new system faces numerous challenges: can algorithms and network consensus truly replace the credit of national sovereignty and central institutions? Will the decentralized characteristics of Bitcoin be eroded? Global regulatory discrepancies, policy conflicts, and "black swan" events could all become factors of instability. Sovereign nations may restrict the expansion of Bitcoin through strong regulation, taxation, and technological blockades to protect their own interests.

Conclusion

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 the future monetary system. However, the road to the Bitcoin revolution is not smooth, and many issues need to be addressed. Whether Bitcoin can become the "value anchor" or "universal equivalent" of the global monetary system depends not only on technological innovation and user consensus but also on the reshaping of the global economic, social, and political structures.

The future monetary system may present a complex pattern with multiple layers and roles. How to balance the global value system among national power, user autonomy, and algorithmic governance remains an open question. Bitcoin, as a currency experiment of the internet era, is worth our continued in-depth consideration.