Many commentators compare Bitcoin to gold, the idea being that its limited supply makes it an attractive store of value in the long term. There have been historical examples of the widespread adoption of gold coins, such as the sovereign and semi-sovereign coinage of the British Empire. However, the adoption of royalty was often encouraged and directed by the British Imperial government, much to the dismay of local officials who often suffered from coin shortages. Bitcoin does not have a nation-state to encourage its adoption, so the comparison to gold currencies is weak. The Spanish silver dollar, one of the most widely used silver coins in the world, may offer a better comparison.
Spanish silver dollar, or TRUE As it was originally known, it was unusual in that it flourished as a trading currency while Spain, its native country, declined. In addition, it was adopted in countries that were never Spanish colonies, violating the premise that a currency could only flourish if it had a strong country of origin that encouraged its use. The three main factors behind Really The success was its availability, quality and verifiability.
the TRUE It was created in 1497, five years after Columbus arrived in America, when King Ferdinand and Queen Isabella reformed Spain's monetary system by… Pragmatism in Medina del Campo. New silver TRUE It can be divided into eight parts, hence “pieces of eight”. Note that it should not be confused with the “doubloon” made of gold.
Fifty years later, in 1545, the Spanish discovered Cerro de Potosi in present-day Bolivia, which was the richest source of silver in world history. A shortage of coins led to the Spanish Crown allowing coinage to be minted TRUE In New Spain in 1535. At the same time, Portuguese explorers not only discovered the route to the Indies and China, thus avoiding the Arabs and Venetians who were trading in gold ducats along the Silk Road, but also favored the merchants of East Asia. Silver over gold. Chinese demand was particularly great because shortages of the bronze used in Ming dynasty coins forced merchants to look for alternatives. Demand for silver soon outstripped Chinese and Japanese supply, creating a ready market for regular shipments of silver TRUE From the colonies of New Spain to the Philippines, another Spanish colony.
Its adoption spread throughout the Americas so that by 1792 it became the de facto currency of the newly independent United States. In fact, when the US dollar was first issued, it was pegged to the US dollar TRUE. 87 years later, in 1879, China did the same thing, pegging the new yuan to the TRUE Or the Mexican peso as it was known then. Thus the growth of the Spanish Empire provided distribution and availability in both America and Asia, which was the first step towards its success.
The second factor is that the Spanish government guaranteed Really The quality has remained constant, which in turn means that its value has remained stable. Unlike many other currencies of that era, the TRUE The vulnerability to degradation was very limited. However, while TRUE Remaining strong, the local Spanish economy weakened. Efforts to combat inflation, some of which included domestic devaluation a barrier currency, stifling exports, encouraging imports and further paralyzing the Spanish economy. These policies, when combined with the demands of constant conflict and lavish royal spending, eventually resulted in a large amount of silver. TRUE It is exported to the rest of Europe. Other European countries, especially the Dutch and British, were eager to compete with the Spanish Empire, and so needed silver to buy tea, silk, and spices from China and Asia. The early English East India Company began by trying to sell heavy woolen fabrics in India and China, and not surprisingly had very limited success. Using silver TRUE It was much easier.
The last factor in Really Success was verifiable. Other countries have tried to replicate this TRUEBut even foreign coins of the same quality and weight were rejected by Chinese and Asian merchants, because it was easier to assume that the Spanish TRUE It was consistent. The United States was one unsuccessful competitor. In 1872 the US Treasury noted that instead TRUE In East Asia, US silver received a 6-8% premium, while US silver suffered a 2% discount. Therefore, in 1873, the United States Coinage Act authorized the creation of a US “trade dollar.” This new coin became known as the “Eagle Dollar” due to its bald eagle design. The United States expected to benefit from the seigniorage, based on the belief that most eagles would never return across the Pacific to where they could be rescued.
The Eagle had mixed success. Although endorsed by Emperor Tongzhi, it was adopted to a limited extent in southern China, but not in the north. Even more disappointing is that as the value of silver declined, the Eagle began to reappear in the United States as its silver content was less than its face value, leading to recalls. It was phased out, and indeed, from 1873, many countries began migrating to the gold standard.
So, the question remains whether Bitcoin, which has no state at all, can be treated as a commercial currency. Like the Spanish silver dollar, it is, in principle, widely available because it exists on the open Internet. where is the TRUE It was of fixed weight and purity, so Bitcoin had a consistent design and structure. The mathematics that supports this is the same in any country. where is the TRUE It gained what effectively served as brand recognition, allowing holders to easily recognize it, so Bitcoin could be easily verified because it existed on a public ledger with an immutable hashed structure. it took TRUE It took about a hundred years to gain recognition and status, and the same may be true for Bitcoin over time. While there may be criticism of Bitcoin's suitability as a medium of exchange,… TRUE Certainly, what is undeniable is that Bitcoin shares many of the success features that have fueled Bitcoin adoption TRUE In terms of availability, quality and verifiability.
That one coin achieved widespread adoption where the mother country was in decline, which was great. The fact that Bitcoin has achieved this without ever having a home country is even more remarkable.
This is a guest post by Nick Philpott. The opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.