The Evolution of Currency and the Future of Bitcoin: Reflections on the Essence of Value Anchors

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 currency has always accompanied changes in trust mechanisms, transaction efficiency, and power structures. Currently, the global monetary system is facing unprecedented challenges: excessive currency issuance, a crisis of trust, worsening sovereign debt, and geopolitical economic shocks triggered by the hegemony of the US dollar.

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

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

This article will review the historical evolution of currency anchor assets, analyze the dilemmas of the current gold reserve system, explore the economic innovations and limitations of Bitcoin, consider the possibility of Bitcoin as a future value anchor, and look forward to the diverse evolutionary paths of the global monetary system.

1. The Historical Evolution of Currency Anchors

1.Barter and the Birth of 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, universally accepted value commodities 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 civilized society, gold and silver, due to their natural properties of scarcity, ease of division, and difficulty of alteration, became the most representative general equivalents. Ancient empires used metal currency as a symbol of national power and social wealth.

In the 19th century, the gold standard was established globally, linking national currencies to gold and standardizing international trade and settlements. 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 the low trust costs between countries, but it also resulted in the limitation of currency supply 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 thoroughly impacted the gold standard system. In 1944, the Bretton Woods system was established, linking the US dollar to gold, with other major currencies pegged to the dollar, forming a "dollar standard." In 1971, the US government unilaterally announced the decoupling of the dollar from gold, officially entering the era of fiat currencies for global sovereign currencies, where nations issue currency based on their own credit and manage the economy through debt expansion and monetary policy.

Fiat currency has brought great flexibility and room for economic growth, but it has also buried the hidden dangers of trust crises, hyperinflation, and currency overproduction. Third-world countries repeatedly fall into currency crises, and even emerging economies struggle amidst 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. 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 within the international financial system post-World War II, but it has also brought significant issues of concentration and opacity.

For example, Germany 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 inability to conduct a physical count. 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 correspondence between "book gold" and physical gold.

) 2. The non-M0 attribute of gold

In modern society, gold no longer possesses the attributes of a currency for everyday circulation ###M0###. Individuals and businesses cannot directly settle daily transactions with gold, 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 of bulk assets, and a hedging instrument in the financial market.

International gold settlement usually involves complex clearing processes, long time delays, and high security costs. Moreover, the transparency of inter-central bank gold transactions 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 actual circulating value.

3. The Economic Innovation and Real Limitations of Bitcoin

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

Since its inception in 2009, Bitcoin's constant total supply, decentralization, and transparent verifiability have sparked a new round of thinking about "digital gold" worldwide. The supply rules of Bitcoin are encoded in algorithms, and the total supply cap of 21 million coins cannot be altered by anyone. This "algorithmically anchored" scarcity is similar to the physical scarcity of gold, but it 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 account and the physical assets" and significantly enhances the efficiency and transparency of settlement.

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

Bitcoin differs fundamentally from traditional currencies: traditional currencies are "top-down" issued and promoted by the power of the state, while Bitcoin is "bottom-up" adopted spontaneously 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 cryptocurrency 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 transcended sovereign boundaries, with a large number of users in both developed countries and emerging markets voluntarily 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 countries or institutions, but rather on whether there are enough users and market consensus.

Insights into the future currency landscape:

• The separation of power and currency may be possible: 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 completely depends on the legislative support of national institutions, as long as there are enough users and social recognition.
• New Sovereign Challenges: Sovereign nations may have to adapt to, or even passively accept, the impact brought by "user-governed currencies" in the future.

) 3. Realistic Limitations and Criticism

Although Bitcoin is revolutionary in theory and technology, it still has 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 only process a limited number of transactions per second, has long confirmation times, and the proof-of-work mechanism consumes a large amount of energy.
• Sovereign resistance and regulatory risks: Some countries take a negative or even repressive attitude towards Bitcoin, leading to a fragmentation of the global market.
• Unequal distribution of wealth and technical barriers: Early users of Bitcoin and a small number of large holders control a significant amount of Bitcoin, leading to a highly concentrated wealth. Moreover, ordinary users need to overcome certain technical barriers to participate, making them susceptible to risks such as fraud and loss of private keys.

4. Similarities and Differences between Bitcoin and Gold: A Thought Experiment on Future Value Anchors

1. The Historical Leap of Transaction Efficiency and Transparency

In the era where gold serves as a value anchor, large-scale international gold transactions often require the use of airplanes, ships, and armored vehicles 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 the repatriation of its gold reserves from overseas, and the entire plan took years to complete.

More critically, the global gold reserve system suffers from severe issues of accounting transparency and verification difficulties. The ownership, storage locations, and actual existence status of gold reserves often rely solely on unilateral statements 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 process, allowing anyone globally to verify it in real-time and publicly. Whether individuals, businesses, or countries, as long as they possess a private key, they can allocate funds at any time without physical transfer or the need for a third-party intermediary, with global transactions 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 Concept of "Role Layering" 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 circulation—issues such as transaction speed, fees, and price volatility make it difficult to become a "cash" or M0 in reality.

However, referring to the currency hierarchy theory of M0/M1/M2, one can envision a future monetary system with 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 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 "unit of measurement" for social resources, widely recognized by global markets, but is not directly used for daily consumption; rather, it serves as a "ballast" for the economic system, much like gold.

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

5. Possible Evolution and Critical Thinking of Future Currency Systems

) 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," with cooperation and competition running parallel.

• Value Anchor: Bitcoin ( or similar digital assets ) serve as decentralized global reserve assets, undertaking roles such as "high-level currency" for cross-border settlement, central bank reserves, and value hedging.
• Payment mediums: stablecoins, sovereign digital currencies, Lightning Network, etc., anchored to Bitcoin or sovereign currencies, to achieve daily circulation, payments, and pricing.
• Local currency: The local currencies of various countries continue to play a role in regulating and managing the local economy, achieving goals related to taxation, social welfare, and economic policy.

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

) 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 the decentralized characteristics of Bitcoin be eroded by mining power oligarchs, protocol governance vulnerabilities, or technological advancements? Regulatory discrepancies, policy conflicts, and "black swan" events on a global scale may all become sources of instability for future monetary systems.