As recently as 100 years ago, in the early 1900s, people could exchange dollars for gold at their local bank. While gold was too difficult to trade between people, banking institutions held gold and gave cash to people. This was during the so-called gold standard. The value of each state coin was determined in relation to a fixed amount of gold. However, this standard changed rapidly in the coming decades.
Towards the end of World War II, dozens of powerful people organized a meeting to discuss a new currency deal designed to minimize the economic damage caused by the war. This meeting was named after the place where it took place: Bretton Woods, New Hampshire, in the United States.
It was a long-term, multi-part plan that spanned decades. And the Bretton Woods delegates decided that the various fiat currencies would now be covered by the US dollar rather than gold itself. At first, the dollar proved stable enough to support the Bretton Woods Accords of 1944 until it was unstable in the decades that followed. During the Vietnam War, President Richard Nixon asked for more money. There was no more money in circulation. So he started printing.
In 1971, President Nixon ended the convertibility of the dollar into gold. This ended the Bretton Woods Agreement after almost 30 years.
The abolition of the gold standard turned each country’s fiat currency into a floating exchange rate that was no longer fixed. Money was no longer measured in dollars; Now every currency was measured relative to every other currency, with prices constantly changing, creating volatility in the forex market.
Bitcoin as an opposition
One asset by which fiat currencies are measured today is Bitcoin (BTC). As I mentioned in 2019, I think Bitcoin is the best investment when it comes to currencies in terms of solid money.
In certain countries, such as Brazil, Argentina and Venezuela, to name a few, the price of Bitcoin is currently at an all-time high compared to its national fiat currency. In relative terms, this would correspond to the price of Bitcoin, which is already at $ 20,000.
The problem is that Bitcoin isn’t ready to be a monetary system in itself. Most people who own Bitcoin just have it, don’t sell it, or don’t use it as currency as it can appreciate quickly despite the downside risks.
Bretton Woods 2.0
Meanwhile, The International Monetary Fund is now calling for a second Bretton Woods era to be announced in 2020. This would set Special Drawing Right (SDR) as the new reserve currency in place of the US dollar. The SDR is the most stable investment option for the IMF. Its value consists of the top five global fiat currencies as protection against volatile movements in the currency markets. The problem with the SDR approach is that it could make the economic situation even worse than it is now.
History has shown that people who have excessive power over money will take advantage of it. Look at President Nixon during the Vietnam War and the original Bretton Woods Accords in the mid-20th century. What’s worse is that almost all central banks are now printing more money, which in turn leads to inflation as fiat currencies lose their purchasing power.
We cannot have a single powerful company that is able to work our way out of temporary difficulties, especially if it stuck us into future debt that would be impossible to manage. This is the opposite of democracy, where few people control the big money decisions that affect everyone. Cryptocurrencies like Bitcoin aim to solve this dilemma due to their limited supply and other beneficial properties of blockchain technology.
Blockchain technology has a solution
Blockchain has raised our standards to look forward to decentralization in the institutions that are supposed to serve us. Real decentralization is achieved when the hierarchy is broken. Everything becomes transparent and incentives are offered to steer the system in the right direction.
Sogur, for example, is a startup facing the ambitious challenge of creating a new monetary system based on its cryptocurrency SGR that models the SDR At the same time, it uses blockchain technology and intelligent economic design recommended by world-famous economists.
I like the idea of currency baskets, which serve as a much more reliable and stable medium of exchange. I don’t like that the IMF has unlimited authority over our global monetary system. Blockchain-based solutions are different: they have a basis that is regulated by an assembly, and they can, for example, give SGR holders a veto right over any decision at any time.
Blockchain technology can combine the elements of decentralized governance in a classic corporate structure. In order to comply with international anti-money laundering laws and requirements while using a linking curve based on smart contracts to control inflation and volatility, two of the biggest problems with traditional fiat currencies remain can be solved.
The views, thoughts, and opinions expressed herein belong solely to the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Charlie Shrem was one of the first Bitcoin entrepreneurs and has been a founding member of the Bitcoin Foundation since 2012. From 2012 to 2014 he was Vice President. He became known for founding BitInstant in 2011, one of the first platforms to buy Bitcoin. As of 2014, he spent two years in prison for running an unlicensed money transfer business. Since then, Shrem has been COO of Decentral, which developed the cryptocurrency wallet Jaxx and founded Crypto.IQ. The podcast is currently being presented Countless stories There he interviews executives in the crypto industry.