Many commentators compare Bitcoin to gold, with the idea that its limited supply makes it an attractive long-term store of value. There have been historical examples of widespread adoption of gold currency, such as the sovereign and semi-sovereign currencies of the British Empire. However, the adoption of sovereigns was often promoted and dictated by the British imperial government, which often embarrassed local magistrates who suffered from currency shortages. The comparison between Bitcoin and gold sovereignty is weak because Bitcoin does not have a nation-state to drive adoption. The Spanish silver dollar, one of the most widely used silver coins in the world, may provide a better comparison.
Spanish silver dollar, or really This currency, as it was originally known, was unusual in that it flourished as a trade currency while its native Spain declined. It was also adopted by countries that were not Spanish colonies, thus violating the premise that a currency could only flourish if there was a strong mother country encouraging its use. The three main factors are: real Success was about availability, quality and verifiability.
that much really It was created in 1497, five years after Columbus landed in America, when King Ferdinand and Queen Isabella reformed the Spanish monetary system. Pragmatics of Medina del Campo. new silver really It can be divided into 8 parts, so it becomes ‘8 pieces’. Do not confuse them with ‘gold coins’ which are made of gold.
Fifty years later, in 1545, the Spaniards discovered Cerro de Potosi in present-day Bolivia, the richest source of silver in world history. A shortage of coins led the Spanish Crown to allow minting. really At the same time, Portuguese explorers not only discovered routes to India and China, avoiding the Arabs and Venetians who traded gold ducats along the Silk Road, but also found routes favored by East Asian merchants. Silver over gold. Demand was particularly great in China, as shortages of bronze used in Ming Dynasty coins forced merchants to look for alternatives. Demand for silver soon outstripped supply from China and Japan, and a market was created ready for regular shipments of silver. really From the colonies of New Spain to another Spanish colony, the Philippines.
Its adoption spread throughout the Americas, and by 1792 it had become the de facto currency of the newly independent United States. In fact, when the US dollar was first issued, it was pegged to the currency. really. Eighty-seven years later, in 1879, China did the same and pegged a new yuan to its exchange rate. really Or the Mexican Peso as it was known at the time. The growth of the Spanish Empire thus provided distribution and availability throughout both the Americas and Asia, which was the first step toward success.
The second factor is that the Spanish government real Quality has remained consistent, which means its value has remained stable. Unlike many other currencies of the era, really It did very limited damage. however, really Although still strong, Spain’s domestic economy has weakened. Efforts to combat inflation, some of which involve depressing the domestic economy veil The coinage discouraged exports and encouraged imports, further damaging the Spanish economy. These policies, combined with ongoing conflict and the demands of excessive royal spending, ultimately resulted in enormous amounts of silver. really It is being exported to other parts of Europe. Other European countries, especially the Netherlands and England, wanted to compete with the Spanish Empire, so they needed silver to buy tea, silk, and spices from China and Asia. The early British East India Company attempted to sell heavy woolen fabrics in India and China, but naturally had very limited success. using silver really It was much easier.
The last element is real Success was verifiable. Other countries also tried to replicate this. reallyHowever, even foreign coins of the same quality and weight were rejected by Chinese and Asian merchants because it was easier to assume they were Spanish coins. really It was consistent. The United States was one of the failed competitors.. In 1872, the U.S. Treasury stated: really US silver, which had a 6-8% premium in East Asia, received a 2% discount. Thus, the United States Coinage Act of 1873 authorized the creation of the American ‘trade dollar’. These new coins became known as ‘eagle dollars’ because of their bald eagle design. The United States expected to benefit from seigniorage based on the belief that most Eagles would never return across the Pacific to where they could be repaid.
Eagle had mixed success. Despite the recognition of the equivalence system, it was adopted to a limited extent in southern China but not in the north. What was more disappointing was that as the value of silver fell, eagles began to reappear in the United States, where the silver content was below face value, forcing redemption. It was gradually abolished, and indeed from 1873 many countries began migrating to the gold standard.
Therefore, the question remains whether Bitcoin, which has no country at all, can really be treated as a trade currency. Like Spanish silver coins, they exist in principle on the public Internet and are therefore available in abundance. where really Because the weight and purity were consistent, Bitcoin has a consistent design and structure. The math behind this is the same in any country. where really Bitcoin has virtually gained brand recognition and is easily recognizable to holders. Therefore, Bitcoin can be easily verified because it is on a public ledger in a hashed, immutable structure. it took really It takes about 100 years to gain recognition and status, and the same could happen for Bitcoin over time. Although there may be criticism about Bitcoin’s suitability as a medium of exchange, really That certainly has been the case, but what is undeniable is that Bitcoin shares several success characteristics that support its adoption. really Availability, quality and verifiability are important.
It is noteworthy that one currency was widely adopted while the mother country was in decline. It is even more surprising that Bitcoin achieved this without a home country.
This is a guest post by Nick Philpott. The opinions expressed are solely personal and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.