Bitcoin: A thought experiment on the value anchor of the next generation of currency

Introduction

Currency is one of the most profound and consensual inventions in the process of human civilization's progress. 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 monetary system is facing unprecedented challenges: currency oversupply, trust crisis, deteriorating sovereign debt, and geo-economic shocks caused by US dollar hegemony.

The birth of Bit and its continuously expanding influence force us to rethink: What is the essence of currency? In what form will the future "value anchor" exist?

"The revolutionary nature of Bit lies not only in its technology and algorithm, but more importantly in being the first 'bottom-up' monetary system driven by users in human history, challenging the millennia-old paradigm of state-led currency issuance."

This article will review the historical evolution of monetary anchors, critique the current gold reserve system's dilemmas, analyze the economic innovations and limitations of Bit, explore the thought experiment of Bit as a future value anchor, and look forward to possible diverse evolution paths of the global monetary system.

I. Historical Evolution of Monetary Anchors

1. Barter and the Birth of Commodity Currency

Early human economic activities primarily relied on the barter model, where trading parties must coincidentally possess the items needed by each other. This "double coincidence of wants" greatly limited the development of production and circulation. To solve this problem, commodities with universal acceptance value (such as shells, salt, livestock, etc.) gradually became "commodity currencies", laying the foundation for later precious metal currencies.

2. Gold Standard and Global Settlement System

Entering civilized society, gold and silver became the most representative general equivalents due to their natural attributes of scarcity, easy divisibility, and difficulty to tamper with. Ancient empires such as Egypt, Persia, Greece, and Rome all used metal currencies as symbols of national power and social wealth.

By the 19th century, the gold standard was established globally, with currencies of various countries pegged to gold, achieving standardization of 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 cross-national trust costs, but it also caused monetary supply to be limited by gold reserves, making it difficult to support the expansion of industrialized and globalized economies (such as "gold shortages" and deflationary crises).

3. Rise of Credit Currency and Sovereign Credit

In the first half of the 20th century, two world wars completely disrupted the gold standard system. The Bretton Woods system established in 1944 pegged the US dollar to gold, with other major currencies then pegged to the US dollar, forming a "dollar standard". In 1971, the Nixon government unilaterally declared the dollar's decoupling from gold, officially entering the era of sovereign credit currency, where nations issue currency based on their own credit and regulate the economy through debt expansion and monetary policies.

Credit currency brought great flexibility and economic growth potential but also planted seeds of trust crisis, hyperinflation, and currency oversupply. Third World countries frequently fell into local currency crises (such as Zimbabwe, Argentina, Venezuela), and even emerging economies like Greece and Egypt struggled in debt crises and foreign exchange volatility.

- Can "bottom-up" approach address global crises? When facing systemic financial crises or large-scale technological attacks, is a monetary system without central coordination more vulnerable?

- Redistribution of power: Has Bit truly been "decentralized"? Or will new oligarchic centers emerge?

3. Realistic Limitations and Criticism

Although Bit is revolutionary in theory and technology, it still faces many limitations in practical application:

- High price volatility: Bit price is extremely susceptible to market sentiment, policy news, and liquidity impacts, with short-term fluctuations far exceeding sovereign currencies.

- Low transaction efficiency and high energy consumption: Bit blockchain has limited transaction processing per second, long confirmation times, and the proof-of-work mechanism consumes massive energy.

- Sovereign resistance and regulatory risks: Some countries adopt a negative or even suppressive attitude towards Bit, leading to global market fragmentation.

- Unequal wealth distribution and technical barriers: Early Bit users and a few large holders control significant amounts of Bit, with highly concentrated wealth. Additionally, ordinary users need certain technical skills, facing risks of fraud and private key loss.

Four, Bit and Gold Similarities and Differences: A Thought Experiment on Future Value Anchors

1. Historical Leap in Transaction Efficiency and Transparency

During the gold value anchor era, international bulk gold transactions often required planes, ships, and armored vehicles for physical transfer, taking days or even weeks, and incurring high transportation and insurance costs. For example, the German central bank once announced a plan to transport gold reserves back home, which took years to complete.

More critically, the global gold reserve system suffers from serious account opacity and inventory challenges. Gold reserve ownership, storage location, and actual existence often rely solely on centralized institutional declarations. Under such a system, trust costs between nations are extremely high, constraining international financial system stability.

Bit addresses these issues in a completely different manner. Bit ownership and transfers are fully recorded on-chain, globally verifiable in real-time by anyone. Whether individuals, enterprises, or nations, possessing a private key allows instant fund allocation without physical transfer or third-party intermediaries, with global arrival taking only tens of minutes. This unprecedented transparency and verifiability gives Bit efficiency and trust foundations in bulk settlement and value anchoring that gold cannot match.

2. Value Anchor "Role Layering" Concept

Despite Bit's superior transparency and transfer efficiency compared to gold, it still faces numerous limitations in daily payments and small-scale circulation—transaction speed, fees, price volatility—making it difficult to become practical "cash" or M0.

However, referencing M0/M1/M2 monetary layering theory, the future monetary system might feature the following structure:

- Bit and similar "anchors" as M1+ level value storage and bulk settlement tools, similar to gold's position in central bank assets, but more transparent and easier to settle.

- Stablecoins based on Bit, second-layer networks (like Lightning Network), sovereign digital currencies (CBDC), etc., handling daily payments, micropayments, and retail settlements. These "sub-currencies" anchor Bit or are issued with its guarantee, achieving circulation efficiency and value stability.

- Bit becomes a "general equivalent" and "measurement unit" of social resources, widely recognized by global markets, yet not directly used for daily consumption, functioning like gold as an economic system "ballast".

This layered structure can utilize Bit's scarcity and transparency as a global "value anchor" while leveraging technological innovation to meet daily payment convenience and low-cost needs.

Five, Potential Evolution and Critical Thinking of Future Monetary Systems

1. Multi-level, Multi-role Monetary Structure

Future monetary systems will likely not be dominated by a single sovereign currency, but feature a three-layer coexistence of "value anchor—payment medium—local currency" with cooperation and competition:

- Value Anchor: Bit (or similar digital assets) as a decentralized global reserve asset, undertaking cross-national settlement, central bank reserves, value hedging, and other "high-tier monetary" roles.

- Payment Medium: Stablecoins, sovereign digital currencies, Lightning Network, etc., anchoring Bit or sovereign currencies, enabling daily circulation, payment, and pricing.

- Local Currency: National currencies continue managing local economic regulation and functions, achieving tax collection, social welfare, and economic policy objectives.

In this multi-layered structure, monetary three major functions (exchange medium, value measure, value storage) will be more clearly divided among different currencies and levels, potentially enhancing global economic risk dispersion 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 national sovereignty and central institutional credit? Will Bit's decentralized characteristics be eroded by computing power oligarchs, protocol governance loopholes, or technological advances? Global regulatory divergences, policy conflicts, and "black swan" events could all become future monetary system destabilizing factors.

Moreover, sovereign nations might constrain Bit's expansion through strict regulation, taxation, and technological blockades to protect their interests. Whether Bit can truly achieve global-scale consensus and maintain its "digital gold" status through a "bottom-up" path remains to be tested by time.

Conclusion and Open Questions

Reviewing monetary evolution from barter to gold standard to credit currency, each "anchor" replacement accompanies profound trust mechanism and social organization transformations. Bit's emergence first transfers the "value anchor" from physical resources and sovereign credit to algorithms, networks, and global user consensus. Its "bottom-up" diffusion model, transparent verifiable ledger, and global network effects provide a novel thought experiment for future monetary systems.

However, Bit's revolutionary path is not smooth. Issues like price volatility, governance challenges, regulatory risks, and technical barriers urgently need resolution. Whether Bit can ultimately become a global monetary system's "value anchor" or "general equivalent" depends not just on technological innovation and user consensus, but on global economic, social, and political structural reshaping.

Open Questions:

- If not Bit, what might future value anchors be?

- How will ultimate monetary trust foundations evolve?

- Among national power, user self-governance, and algorithmic governance, what balance will future global value systems achieve?

While chasing the next trend in new narratives and technological waves, perhaps what most deserves attention are those innovations seemingly "simple" yet most essentially penetrating. Bit, as the internet era's monetary experiment, warrants our continued deep contemplation.

Appendix/Notes

1. [1] Carl Menger, "The Origin of Money"

2. [2] Barry Eichengreen, Golden Fetters: The Gold Standard and the Great Depression, 1919-1939, Oxford University Press, 1992.

3. [3] Satoshi Nakamoto, "Bit: A Peer-to-Peer Electronic Cash System", https://bit.org/bit.pdf