I think that if people want to truly understand Bitcoin, they need to learn Bitcoin from the perspective of different disciplines. Bitcoin is the crystallization of human multidisciplinary, representing a whole new human civilization. In addition to economics, computer science, game theory and other disciplines, I think we also need to understand history, especially currency history. Only when we truly understand the history of currency can we understand the historical mission of Bitcoin.
As I mentioned in the last post, Bitcoin is called digital gold. Bitcoin and gold have many similar properties, and Bitcoin also has unique advantages. If we want to know the future of Bitcoin, we must know the role of gold in history. Only by learning from history can we better judge the future.
In the past 100 years, gold has been the core of the Bretton Woods system and has played a role in anchoring the world's currency.
After the start of the First World War, international trade was greatly affected. It is difficult for countries to convert currencies into gold, which caused the collapse of the gold standard system. After the start of the First World War, international trade was greatly affected. It is difficult for countries to convert currencies into gold, which caused the collapse of the gold standard system. After the Great Depression of 1929 and World War II, in order to strengthen international cooperation and rebuild the international monetary order, 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, United States, for the United Nations Monetary and Financial Conference, also known as the Bretton Woods Conference. he delegates deliberated during 1–22 July 1944, and signed the Bretton Woods agreement on its final day.
Its core content include:
The U.S. dollar is linked to gold, and the price of gold is set at $35 an ounce. Governments or central banks can exchange U.S. dollars for gold at fixed prices. Governments of various countries need to coordinate with the US government to maintain this price in the international financial market.
The country's currency is pegged to the U.S. dollar. The governments of other countries set the price of their respective currencies to convert to gold to determine the exchange rate with the U.S. dollar.
The exchange rate of various currencies against the US dollar can only fluctuate within 1% of the legal exchange rate. If the market exchange rate exceeds the 1% fluctuation range of the legal exchange rate, governments of all countries are obliged to intervene in the foreign exchange market to maintain the stability of the exchange rate.
The Bretton Woods agreement stipulates that currencies of various countries can be freely exchanged.
The Bretton Woods agreement put the U.S. dollar in the same position as gold and became the most important international reserve currency among foreign exchange reserves.
The member states of the International Monetary Organization shall pay 25% of the payment amount in gold or a currency convertible into gold, and the remaining part shall be paid in their own currency.
The fixed exchange rate system under the Bretton Woods system anchors the prices of currencies in the world by maintaining the US dollar and gold at a fixed exchange price. At this time, governments of various countries cannot print and distribute currencies at will, and must ensure that there is sufficient gold to exchange currencies. Gold functions as an anchor of value.
In the 1950s and 1960s, European countries recovered their economies and began to use their reserves to exchange large amounts of gold from the United States. In the 1960s and 1970s, multiple dollar crises further weakened the credit of the dollar.
On August 15, 1971, Nixon announced making the dollar inconvertible to gold directly, which was called Nixon Shock. Meeting in December 1971 at the Smithsonian Institution in Washington D.C., the Group of Ten signed the Smithsonian Agreement. Soon after a 10% devaluation was announced in February 1973, Japan and the EEC countries decided to let their currencies float. This proved to be the beginning of the collapse of the Bretton Woods System. The end of Bretton Woods was formally ratified by the Jamaica Accords in 1976.
Bretton Woods system:
https://en.wikipedia.org/wiki/Bretton_Woods_systemThe collapse of the Bretton Woods system indicates that gold no longer functions as a currency in human society, but can only be freely traded as a commodity. In the past human history, gold as the most valuable commodity naturally served as currency. But after that, the issuance of human currency has entered an era without any constraints.
In 1972, the signing of the Jamaica Agreement realized the non-monetization of gold through legal forms, which brought the legal tenders of countries around the world into an era of free floating. This means that governments of various countries issue legal tenders, no longer need to use gold as an endorsement, and can issue currencies at will. As the number of legal tenders in various countries continues to grow, global inflation will be inevitable and may eventually lead to the collapse of the world economic system.
This happened frequently in the past ten years. Especially in 2020, due to COVID-19, we have encountered the largest currency over-issuance in the history of human civilization. The property of ordinary people continues to depreciate. The past fifty years have been the most unfair in the history of human currency. Until Satoshi Nakamoto created Bitcoin and gave us hope of solving the problem.
As "digital gold", Bitcoin creates unlimited possibilities for our future. Compared to gold, governments almost cannot control Bitcoin. Bitcoin has the advantage of decentralization, and no institution can modify Bitcoin's data. So Bitcoin can perform the function of "digital gold" well. I believe that Bitcoin may be used as a value anchor to rebuild the "Bretton Woods System" like gold in the future.
In the next ten to twenty years, due to the legal tender, the value of the currency will inevitably depreciate due to over-issue. There may be frequent economic and financial crises before the reconstruction of the world monetary system. At this point, the government will find that if they want their fiat currency to be supported by people, their fiat currency must be anchored to Bitcoin. Ordinary people will only recognize the legal currency that anchors Bitcoin. When more and more fiat currencies rely on pegged bitcoin issuance, a world monetary system centered on bitcoin will be established.
These are my predictions about the development of Bitcoin in the next two decades. Human civilization will inevitably establish a new world monetary system and world financial system centered on Bitcoin. This process may be long and there may be many difficulties and setbacks, but it will definitely be realized in the future.
This is my opinion, what about you?
