Bitcoin: A Thought Experiment on the Next-Generation Monetary Value Anchor
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Bitcoin: A Thought Experiment on the Next-Generation Monetary Value Anchor
While we keep chasing the next big thing amid new narratives and technological waves, perhaps what deserves our most attention are those innovations that seem "simple" yet possess the greatest essential impact.
Navigating Web3 tides with focused insightsBy Liu Ye Jinghong
Author's Note
As a long-time practitioner in the Web3 industry, I have witnessed and participated in the birth and evolution of countless new concepts, narratives, and innovations—from DeFi, NFTs, DAOs, to various public chains, sidechains, and Layer 2 solutions. The industry seems perpetually obsessed with chasing the newest, coolest, and most imaginative breakthroughs.
Yet amid this relentless wave of innovation, revisiting Bitcoin’s whitepaper and reflecting on its original design principles and economic essence has brought me fresh insights. Bitcoin is undoubtedly the foundational starting point of the entire industry—the most fundamentally revolutionary invention. Its simplicity, restraint, and algorithm-based trust mechanism remain unmatched by any successor.
After experiencing so many new narratives, re-examining Bitcoin itself and reconsidering its unique place in the history of monetary evolution—and its future potential—may be more meaningful than blindly chasing the next trend. I hope this article can help you step back from the noise, return to first principles, and spark new thinking.
Introduction
Money is one of humanity’s most profound and widely accepted inventions throughout civilizational development. From barter to commodity money, from the gold standard to sovereign fiat currencies, the evolution of money has always paralleled shifts in trust mechanisms, transaction efficiency, and power structures. Today, the global monetary system faces unprecedented challenges: currency over-issuance, crises of trust, deteriorating sovereign debt, and geopolitical-economic turbulence triggered by dollar dominance.
The emergence and growing influence of Bitcoin compel us to rethink: What is the true nature of money? In what form will the future “value anchor” exist?
“Bitcoin’s revolutionary significance lies not only in its technology and algorithms, but in being the first user-driven, bottom-up monetary system in human history—challenging the millennia-old paradigm of state-controlled money issuance.”
This article will review the historical evolution of monetary anchors, critique the real-world limitations of the gold reserve system, analyze Bitcoin’s economic innovations and constraints, explore Bitcoin as a thought experiment for the future value anchor, and envision possible paths for the多元化 evolution of the global monetary system.
I. Historical Evolution of Monetary Anchors
1. Barter and the Emergence of Commodity Money
Early human economies relied primarily on barter, where both parties had to simultaneously desire what the other offered—a “double coincidence of wants”—which severely limited production and exchange. To overcome this, certain goods with widespread acceptance (such as shells, salt, or livestock) gradually evolved into “commodity money,” laying the foundation for later precious metal currencies [1].
2. The Gold Standard and Global Settlement Systems
In advanced civilizations, gold and silver became the most representative forms of general equivalents due to their scarcity, divisibility, and resistance to tampering. Ancient empires like Egypt, Persia, Greece, and Rome used metallic currencies as symbols of state power and social wealth.
By the 19th century, the gold standard was established globally, with national currencies pegged to gold, enabling standardized international trade and settlement. Britain formally adopted the gold standard in 1816, followed by other major economies. This system’s greatest advantage was a clear monetary anchor and low cross-border trust costs. However, it constrained money supply based on gold reserves, making it difficult to support industrialization and global economic expansion—leading to issues like “gold shortages” and deflationary crises [2].
3. Fiat Currency and the Rise of Sovereign Credit
The first half of the 20th century saw two world wars shatter the gold standard. The 1944 Bretton Woods Agreement tied the U.S. dollar to gold, and other major currencies to the dollar, creating a “dollar standard.” In 1971, the Nixon administration unilaterally severed the dollar’s link to gold, marking the official transition of global sovereign currencies into the fiat era. States now issue money based on their own credit, using debt expansion and monetary policy to manage economies.
Fiat money brought immense flexibility and growth potential, but also sowed the seeds of trust crises, hyperinflation, and excessive money printing. Developing nations frequently suffer currency collapses (e.g., Zimbabwe, Argentina, Venezuela), while emerging economies like Greece and Egypt struggle under debt and foreign exchange volatility [2].
II. The Real-World Dilemmas of the Gold Reserve System
1. Concentration and Opacity of Gold Reserves
Although the gold standard is obsolete, gold remains a key reserve asset on central bank balance sheets. Today, about one-third of official gold reserves are stored in the vaults of the Federal Reserve Bank of New York. This arrangement originated from post-WWII confidence in U.S. economic and military security, but introduces significant risks of concentration and lack of transparency.
For example, Germany announced plans to repatriate part of its gold reserves from the U.S., citing distrust in the Fed’s inventory records and the inability to conduct physical audits. Whether recorded holdings match actual gold is nearly impossible for outsiders to verify. Moreover, the proliferation of paper gold derivatives further weakens the correspondence between book value and physical gold.
2. Gold’s Non-M0 Nature
In modern society, gold no longer functions as everyday circulating money (M0). Individuals and businesses cannot use gold for daily transactions, nor easily hold or transfer physical gold. Its primary roles are limited to inter-sovereign settlements, large-scale asset reserves, and financial market safe-haven instruments.
International gold settlements involve complex clearing processes, long delays, and high security costs. Central bank gold transactions are highly opaque, relying on centralized institutions for verification. As a result, gold’s role as a global “value anchor” has become increasingly symbolic rather than functionally relevant.
III. Bitcoin’s Economic Innovation and Practical Limitations
1. Bitcoin’s “Algorithmic Anchor” and Monetary Properties
Since its inception in 2009, Bitcoin’s fixed supply, decentralization, and transparent verifiability have reignited global interest in the idea of “digital gold.” Its supply rules are encoded in algorithm—capped at 21 million coins, immutable by any party. This “algorithmic anchoring” creates scarcity akin to gold’s physical scarcity, yet is more absolute and transparent in the internet age.
All Bitcoin transactions are recorded on a blockchain, publicly verifiable by anyone worldwide without reliance on centralized intermediaries. This feature theoretically eliminates the risk of discrepancies between books and physical assets, while greatly enhancing settlement efficiency and transparency [3].
2. Bitcoin’s Bottom-Up Diffusion Path
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A fundamental difference between Bitcoin and traditional money: Traditional currencies are issued and promoted top-down by state authority, whereas Bitcoin spreads bottom-up through voluntary adoption by users, eventually reaching enterprises, financial institutions, and even sovereign states.
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Users first, institutions later: Bitcoin was initially adopted by a community of cryptography enthusiasts and libertarians. As network effects grew, prices rose, and use cases expanded, more individuals, companies, and financial institutions began holding Bitcoin.
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State adaptation follows: Some countries have adopted Bitcoin as legal tender; others have approved Bitcoin-related financial products, allowing institutional and retail participation via compliant channels. Bitcoin’s user base and market acceptance have pushed sovereign states to passively embrace this new monetary form.
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Global borderless expansion: Bitcoin’s network effect transcends sovereignty. Users in both developed and emerging markets voluntarily adopt Bitcoin for daily life, asset storage, and cross-border transfers.
This historic shift shows that whether Bitcoin becomes a global currency no longer depends solely on state or institutional “approval,” but on sufficient user adoption and market consensus.
Implications for the future monetary landscape:
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Potential separation of power and money: Money may no longer be inherently tied to state power, but instead belong to the internet, algorithms, and global user consensus.
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State support becomes “icing on the cake”: Bitcoin’s status as a global currency no longer hinges entirely on legislative backing—if enough users and social recognition exist, it can thrive independently.
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New challenge to sovereignty: Nation-states may be forced to adapt to—or even passively accept—the disruptive impact of user-autonomous currencies.
Critique and reflection:
Limits and risks of user autonomy: Without sovereign backing, how are extreme volatility, governance challenges, and “black swan” events managed?
Can “bottom-up” systems withstand global crises? In systemic financial crises or large-scale cyberattacks, is a decentralized monetary system more fragile due to lack of central coordination?
Power redistribution: Is Bitcoin truly “decentralized,” or will new oligarchic centers inevitably emerge?
3. Practical Limitations and Criticisms
Despite its theoretical and technological revolution, Bitcoin faces several real-world constraints:
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High price volatility: Bitcoin’s value is highly sensitive to market sentiment, policy news, and liquidity shocks, with short-term fluctuations far exceeding those of fiat currencies.
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Low transaction efficiency and high energy consumption: Bitcoin’s blockchain handles limited transactions per second, has long confirmation times, and consumes vast amounts of energy via proof-of-work.
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Sovereign resistance and regulatory risk: Some governments take negative or suppressive stances toward Bitcoin, fragmenting global markets.
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Wealth inequality and technical barriers: Early adopters and a small number of large holders control most Bitcoin, leading to concentrated wealth. Additionally, ordinary users face technical hurdles and risks such as fraud and lost private keys.
IV. Bitcoin vs. Gold: A Thought Experiment on the Future Value Anchor
1. A Historical Leap in Transaction Efficiency and Transparency
During the era of gold as a value anchor, large-scale international gold transfers required aircraft, ships, and armored vehicles—taking days or even weeks, with high transportation and insurance costs. For instance, the German central bank’s plan to repatriate overseas gold reserves took years to complete.
More critically, the global gold reserve system suffers from severe opacity and audit difficulties. Ownership, storage locations, and physical existence often rely solely on declarations from centralized institutions. This results in extremely high trust costs between nations and undermines the stability of the international financial system.
Bitcoin addresses these issues in a fundamentally different way. Ownership and transfers are fully recorded on-chain, instantly and publicly verifiable by anyone worldwide. Individuals, businesses, or states can move funds anytime with just a private key—no physical movement, no third-party intermediaries, global settlement within minutes. This unprecedented level of transparency and verifiability gives Bitcoin an efficiency and trust foundation that gold cannot match in large-scale settlements and value anchoring.
2. A Hypothetical “Role Stratification” of Value Anchors
While Bitcoin vastly outperforms gold in transparency and transfer speed, it still faces limitations in daily payments and micro-transactions—issues like speed, fees, and price volatility prevent it from serving as practical “cash” or M0.
However, drawing from monetary layering theories like M0/M1/M2, we might envision a future monetary structure where:
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Bitcoin-like assets serve as M1+ tier stores of value and tools for large-scale settlement—similar to gold’s role in central bank reserves, but more transparent and easier to settle.
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Bitcoin-pegged stablecoins, Layer 2 networks (e.g., Lightning Network), and sovereign digital currencies (CBDCs) handle daily payments, micropayments, and retail settlement. These “sub-currencies” are backed by or pegged to Bitcoin, combining circulation efficiency with value stability.
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Bitcoin becomes a globally recognized “general equivalent” and unit of account—not for direct consumer spending, but as a “ballast” for the economic system, much like gold today.
Such a layered architecture would leverage Bitcoin’s scarcity and transparency as a global “value anchor,” while using technological innovation to meet the demand for fast, low-cost daily transactions.
V. Possible Evolution of the Future Monetary System and Critical Reflections
1. Multi-Layered, Multi-Role Monetary Architecture
The future monetary system is unlikely to be dominated by a single sovereign currency. Instead, a three-tier coexistence of “value anchor—medium of exchange—local currency” may emerge, featuring both cooperation and competition:
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Value Anchor: Bitcoin (or similar digital assets) acts as a decentralized global reserve asset, performing high-level functions such as cross-border settlement, central bank reserves, and value hedging.
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Medium of Exchange: Stablecoins, sovereign digital currencies, and Lightning Network facilitate daily transactions, payments, and pricing—pegged to Bitcoin or fiat currencies.
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Local Currency: National currencies continue to serve domestic economic regulation, taxation, social welfare, and policy implementation.
In this multi-layered system, the three core functions of money—medium of exchange, unit of account, store of value—are clearly distributed across different currencies and tiers, enhancing global risk diversification and innovation capacity.
2. New Trust Mechanisms and Potential Risks
But this new system is not without risks. Can algorithmic consensus truly replace the credit of nation-states and central institutions? Could Bitcoin’s decentralization be eroded by mining oligopolies, protocol governance flaws, or technological advances? Regulatory fragmentation, policy conflicts, and “black swan” events across jurisdictions could all destabilize the future monetary order.
Moreover, sovereign states may resist Bitcoin’s expansion through strict regulation, taxation, or technological blockades to protect national interests. Whether Bitcoin can sustain a genuine global consensus and maintain its “digital gold” status over time along its bottom-up path remains to be tested by history.
Conclusion and Open Questions
Reviewing the evolution of money—from barter to gold standard to fiat—we see each shift in the “anchor” accompanied by deep transformations in trust mechanisms and social organization. Bitcoin marks the first time the “value anchor” has shifted from physical resources and sovereign credit to algorithms, networks, and global user consensus. Its bottom-up diffusion, transparent and auditable ledger, and global network effects offer a bold new thought experiment for the future of money.
Yet, Bitcoin’s revolutionary path is far from smooth. Price volatility, governance challenges, regulatory risks, and technical barriers must still be addressed. Whether Bitcoin ultimately becomes a “value anchor” or “general equivalent” in the global monetary system depends not only on technological progress and user consensus, but also on the broader transformation of global economic, social, and political structures.
Open questions:
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If not Bitcoin, what will be the future value anchor?
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How will the ultimate foundation of trust in money evolve?
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Among state power, user autonomy, and algorithmic governance, what kind of balance will shape the future global value system?
As we continuously chase the next big thing in new narratives and technological waves, perhaps the most important innovations to watch are those that appear “simple” yet possess the deepest fundamental insight. Bitcoin, as a monetary experiment of the internet age, deserves our sustained and thoughtful engagement.
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