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Digital Money challenges the global value system: Exploring the future of diversified currencies.
The Future of Digital Money and the Global Value System
Introduction
Currency is one of the most profound and consensual inventions in the process of human civilization. From barter to metal currency, from the gold standard to sovereign credit currency, the evolution of currency has been accompanied by changes in trust mechanisms, transaction efficiency, and power structures. Today's global currency system is facing unprecedented challenges: excessive currency issuance, a crisis of trust, worsening sovereign debt, and geopolitical turmoil caused by the hegemony of the US dollar.
The emergence of Digital Money and its ongoing expanding influence prompts us to rethink: what is the essence of currency? In what form will the "value anchor" of the future exist?
The revolutionary nature of Digital Money is not only reflected in technology and algorithms, but also in that it is the first "bottom-up" currency system in human history, spontaneously driven by users, challenging the millennia-old paradigm of state-led currency issuance.
This article will review the historical evolution of currency anchors, examine the dilemmas of the current gold reserve system, analyze the economic innovations and limitations of Digital Money, explore the potential of Digital Money as a future value anchor, and look forward to possible diversified development paths for the global monetary system.
1. The Historical Evolution of Currency Anchors
1. The Birth of Barter and Commodity Money
The earliest economic activities of humanity mainly relied on the "barter" model, where both trading parties must exactly possess the goods needed by the other. This "coincidence of double needs" greatly limited the development of production and circulation. To solve this problem, commodities with universally accepted value (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, divisibility, and difficulty to tamper with, have become 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 the currencies of various countries to gold, thereby standardizing international trade and settlements. England officially established the gold standard in 1816, and other major economies gradually followed suit. The greatest advantage of this system lies in the clear "anchor" of the currency and the low trust costs between countries, but it also led to the limitation of currency supply due to gold reserves, making it difficult to support the expansion of industrialization and the global economy (such as "gold shortages" and deflationary crises).
3. The Rise of Credit Money and Sovereign Credit
In the first half of the 20th century, the two World Wars completely impacted the gold standard system. In 1944, the Bretton Woods system was established, linking the US dollar to gold, while other major currencies were linked to the dollar, forming a "dollar standard". In 1971, the US government announced the decoupling of the dollar from gold, and global sovereign currencies officially entered the era of fiat money, where countries issued currency based on their own credit and regulated the economy through debt expansion and monetary policy.
Credit money has brought great flexibility and room for economic growth, but it has also sown the seeds of a trust crisis, vicious inflation, and the hidden dangers of currency over-issuance. Some countries have fallen into a local currency crisis, and even some emerging economies are struggling amidst debt crises and foreign exchange turmoil.
2. The Real Dilemma of the Gold Reserve System
1. 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 after World War II, but it has also led to significant concentration and opacity issues.
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 time without a physical audit. It is difficult for outsiders to verify whether the treasury accounts align with the actual gold reserves. Furthermore, the proliferation of derivatives such as "paper gold" has further weakened the correlation between "account gold" and physical gold.
2. The non-M0 attribute of gold
In modern society, gold no longer possesses the attributes of daily circulating currency (M0). Individuals and businesses cannot directly use gold to settle everyday transactions, 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 financial markets.
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 account audits rely on the trust endorsement of centralized institutions. This makes gold's role as a global "value anchor" increasingly symbolic rather than a reflection of real circulation value.
3. The Economic Innovation and Real Limitations of Digital Money
1. The "algorithmic anchoring" of Digital Money and its monetary attributes
Since the birth of a certain Digital Money in 2009, its characteristics of constant total supply, decentralization, and transparency have triggered a new round of thinking about "digital gold" globally. The supply rules of this Digital Money are written into the algorithm, and the total supply limit cannot be changed by anyone. This "algorithmically anchored" scarcity is similar to the physical scarcity of gold, but it is more thorough and transparent in the era of the global internet.
All transactions are recorded on the blockchain, and anyone in the world can publicly verify the ledger without relying on any centralized institution. This property theoretically greatly reduces the risk of "discrepancy between the ledger and the physical assets" and significantly enhances the efficiency and transparency of settlement.
2. The "bottom-up" diffusion path of Digital Money
Digital Money and traditional currency have a fundamental difference: traditional currency is "top-down" enforced and promoted by state power, while Digital Money is "bottom-up" spontaneously adopted by users and gradually spreads to enterprises, financial institutions, and even sovereign states.
Users first, institutions later: Digital Money was initially adopted spontaneously by a group of technology 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 Digital Money assets.
Passive adaptation by countries: Some countries have designated digital money as legal tender, while others have approved related financial products, allowing institutions and the public to participate in the digital money market through compliant channels. The user base and market acceptance of digital money have driven sovereign nations to passively embrace this new form of currency.
Global Borderless Expansion: The network effect of Digital Money breaks through sovereign borders, with a large number of users in both developed countries and emerging markets voluntarily adopting Digital Money in their daily lives, asset reserves, and cross-border transfers.
This historic change indicates that whether digital money can become a global currency no longer solely depends on the "approval" of countries or institutions, but rather on whether there are enough users and market consensus.
Insights on the Future Monetary Landscape:
3. Limitations and Criticism
Although digital money has revolutionary potential in theory and technology, there are still many limitations in real-world applications:
IV. Similarities and Differences Between Digital Money and Gold: A Thought Experiment as the Anchor of Future Value
1. The Historical Leap of Transaction Efficiency and Transparency
In the era where gold serves as a value anchor, international bulk gold transactions often require the use of airplanes, ships, armored vehicles, and other means for physical transfer. This 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 gold reserves from overseas, a plan that took years to complete.
More critically, there are serious issues of opacity in the global gold reserve system and challenges in inventory counting. The ownership, storage locations, and actual existence status of gold reserves often rely solely on unilateral declarations from centralized institutions. In such a system, the trust cost between countries is extremely high, and the robustness of the international financial system is constrained.
Digital Money addresses these issues in a completely different way. Ownership and transfers are recorded on the chain, allowing anyone globally to verify in real-time and publicly. Whether individuals, businesses, or countries, as long as they have the private key, they can allocate funds at any time without physical transfer or third-party intermediaries, with global settlement taking only a few minutes. This unprecedented transparency and verifiability give Digital Money an efficiency and trust foundation in bulk settlement and value anchoring that gold cannot match.
2. The "Role Layering" Concept of Value Anchors
Although Digital Money far surpasses 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 "cash" or M0 in reality.
However, referring to the currency hierarchy theory of M0/M1/M2, we can envision a future currency system with the following structure:
This layered structure can leverage the scarcity and transparency of Digital Money as a global "value anchor" while also utilizing technological innovation to meet the convenience and low-cost demands of daily payments.
V. Possible Evolution of Future Currency Systems and Critical Thinking
1. Multi-layered, multi-role currency structure
The future monetary system is likely to no longer be dominated by a single sovereign currency, but rather a coexistence of "value anchor – payment medium – local currency" in three layers, where cooperation and competition run parallel:
Under this multi-layered structure, the three major functions of currency (medium of exchange, measure of value, store of value) will be more clearly divided among different coins and levels, and the global economy's risk diversification and innovation capability 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 Digital Money be eroded by computing power oligarchs, protocol governance loopholes, or technological advancements? Regulatory discrepancies, policy conflicts, and "black swan" events globally may all contribute to this.