Previously, I have said that to truly understand the function of Bitcoin in the current human society, history, esp, history of global currency, must be learned. History is repeating every moment, telling the answers of untold unfathomable questions to us. We frequently call Bitcoin “digital gold”, so the past of gold is needed for further predication of the prospect of Bitcoin.
Previously, I have talked about the invention and collapse of Bretton Woods system. The history of human currency for the last eighty years can be briefly divided into three phases:
1.1944~1973. Bretton Woods system. Gold exchange standard is implemented: USD is linked to gold, and the currencies of other countries linked to USD. Gold is adopted as the final value anchor, and a fixed exchange rate is set. Legal tenders of different countries are all valuable;
2.1973~2009. Jamaica system. Gold is demonetized, totally quit its function of currency. Currencies don’t need to be linked to gold any more, leading the world into the age of purely credit money. They can be issued infinitely, entering a floating exchange rate system, and exchange rate is determined by the market;
3.2009~2021. Jamaica system and Bitcoin system coexist. Since 2009, Bitcoin, a kind of super sovereign currency based on mathematics and algorithm, was born, no single strength has the power to control Bitcoin network. Bitcoin gradually demonstrates the features of digital gold, gaining increasing recognition and support.
Then what would happen in the future? We may see:
2040~2140. Bitcoin standard exchange system. All fiats in the world would employ Bitcoin as the anchor, to set up a new global currency and finance structure on the foundation of Bitcoin.
That’s my anticipation, which might take a long time to come true. But I firmly believe that’s bound to happen.
Then what about the currency system before 1944? What’s the regulation then?
Earlier than 1944, the globe uses gold standard currency system, treating gold, the basis of this system, as the universal equivalent yet without USD as the intermediary. Take gold as the standard currency, the exchange rate among different currencies launched by various countries relies on the value of these currencies respectively. Gold can flow freely among these countries. International balance of payment is adjusted automatically.
Gold standard Wiki:
https://en.wikipedia.org/wiki/Gold_standardIn 1816, Britain release The Gold Standard Act. Hence gold standard is put into action, encouraging gold to rise to be global currency. In 1871, German announce to adopt the gold standard system, so did Denmark, Sweden, Norway in 1873. After 1870s, this system gets accepted worldwide. The currency systems of many countries are unified step by step, and the gold standard system is evolving from a domestic system to an international one.
International gold standard system has the following characters:
1.Gold can be freely minted, exchanged, exported and imported. Anyone can use gold as the universal currency;
2.Gold can be used to specify the value currency represents. Every currency has a legal value, and currencies of diversified countries have a certain exchange rate according to the value contained in it;
3.Gold has unlimited legal tender and the power of unlimited means of payment;
4.The currency reserves of governments are gold, which is used in international settlements .
Since gold can be transferred freely between countries, which ensures the relative stability of the foreign exchange market and the unity of the international financial market. Therefore, the gold standard is a relatively sound and stable monetary system. However, to prepare for WWI, all governments strengthened their plunder of gold, which severely weakened the free casting and conversion of gold, the export and import of gold suffered great restriction. When the war broke out, the military expenditures of various countries increased drastically, stopping the casting and conversion of gold, prohibiting its import and export, which fundamentally destroyed the foundation of the survival of gold standard. That system completely fell apart.
Reconnecting the history of gold, we can discover that the half century we are now in is the most unreasonable years in the world currency system of the past two centuries. All currencies issued by countries have to be anchored with gold and supported by certain value, no matter during Bretton Woods system or during the century before WWⅡ. But at present, countries in the world can issue legal tender without restrictions. Money is printed just like paper! That led to unlimited issuance of currency and festering inflation. So Bitcoin comes.
Our currently prevailing monetary system has no solid value support, leaving countless potential crises, which will inevitably lead to the outbreak of economic and financial crises, and then the system breaks down. Bitcoin will be chosen since it's similar to gold in some degree and has advantages that gold has not.
When we replace gold with Bitcoin and establish a world currency system centered on Bitcoin, isn't this the reappearance of the gold standard system 100 years ago? But this time, digital gold, Bitcoin takes the place of physical gold.
I believe this is the future of Bitcoin. Bitcoin becomes a currency embraced by the world, allowing the return of the gold standard system. What Bitcoin did is more than creating a brand-new fabric.
My opinion is above. How about you?
