This story originally was published by Real Clear Wire.
By Logan Beirne
Bitcoin may feel futuristic, but when you peel away its digital veneer, it is just the latest chapter in a 2,600-year story of value, trust, and human ingenuity. Having reached record highs, Bitcoin has been making headlines as nations declare strategic stockpiles and corporate America embraces the new asset class. Why now?
The answer lies in a pattern as old as civilization itself: When governments corrupt a currency, people innovate their way to something better.
As the saying goes, “History doesn’t repeat itself, but it often rhymes.” When the first coin clanked into existence in 600 B.C., it was not merely a gold and silver alloy stamped with the face of the Lydian king. It was a financial revolution. For the first time, people could move past the inefficiencies of barter and instead use a medium of exchange to trade. But this value was not in the sparkle; it was the individuals’ collective understanding that these coins have worth.
The integrity of that system has waxed and waned over the ensuing millennia, typically driven by governmental spending policies. The silver-backed Roman denarii enabled the empire to flourish, but as subsequent emperors diluted its value – reducing their silver content to fund wars and build grand palaces – citizens lost faith in their currency. When Emperor Nero reduced silver content from 98% to 83% in A.D. 64, Romans began hoarding old coins and rejecting new ones. By A.D. 260, the denarius contained just 5% silver. Inflation spiraled and commerce crumbled, contributing to the eventual fall of the empire.
The United States has battled currency crises since our nation’s birth, but unlike Rome, America has consistently innovated solutions along the way. After we declared independence from Britain, the Continental Congress printed the nation’s first paper money. Called “Continentals,” it was backed by neither gold nor silver – simply by belief in its value. While gold and silver are at least relatively scarce metals that constrain supply, paper can be printed. And that is precisely what the first U.S. government did.
Desperate to pay troops and buy supplies necessary to wage the Revolutionary War, Congress turned to making more Continentals. Bills flooded the market, driving down value as Americans questioned whether the new nation could honor its promises. In 1777, one patriot complained to his father as inflation spiked by an estimated 200%, writing, “America has much more to fear from the effects of large quantities of paper money than from the operations of British Generals.”
Prices climbed so rapidly that George Washington himself came to refuse Continentals as payment. In fact, it became common to describe something of little value as “not worth a Continental.” The currency became such a laughingstock that sailors paid in the bills would sew them onto their clothes and parade through town to mock it. But rather than crumble like the Roman Empire, the U.S. innovated: This currency crisis was a driving force that led our Founding Fathers to scrap the American government under the Articles of Confederation and draft our current Constitution.
This change represented more than political reform – it was monetary advancement, shifting from discretionary to rule-based money. The new U.S. government adopted a bimetallic standard in 1792, which tied the value of dollars to both gold and silver. The country eventually simplified its approach by shifting to a de facto gold standard in 1834, which lasted until 1971 when President Nixon abandoned it in favor of fiat currency. Like the Continentals before it, the dollar has since been backed by belief in its value: full faith and credit of the U.S. government.
And then came the 2008 financial crisis. Lehman Brothers fell, banks wobbled, and the public? They started asking: “What is money?” It was then, from the digital shadows, that an anonymous figure – Satoshi Nakamoto – dropped a whitepaper like a patriot dropping a leaflet on the eve of the Revolutionary War: Bitcoin: A Peer-to-Peer Electronic Cash System. No emperors. No banks. Just math, cryptography, and an unbreakable record called the blockchain. A new kind of trust was born – not in a ruler, but in code.
What was initially viewed as an interesting hypothetical idea was quickly put to real-world use. Users beget more users. Trust grows. Entrepreneurs dream. It’s a full-blown historical saga unfolding in real time.
Bitcoin has risen above the other cryptocurrencies it inspired, in large part due to its scarcity: no longer could an Emperor add bits of cheap copper to silver coins or Congress print more paper because it is hardcoded that only 21 million Bitcoin will ever exist. Further, all Bitcoin transactions are verified by a decentralized network of approximately 20,000 individuals’ computers across the world, all checking one another beyond politicians’ control. In an age of runaway government spending, investors have turned to those scarce Bitcoin that no government can dilute. A decentralized system that guards the people from government domination – how American is that!
It is no coincidence that Bitcoin has skyrocketed to a $2 trillion valuation just as the U.S. national debt has reached record highs. Researchers debate how long fiat currencies last on average throughout history, with some placing time of death at between 27 and 35 years. Since the U.S. has been off the gold standard for over 50 years, history suggests the dollar is poised for decline.
People are simply asking the age-old question: What is money, really? As trust is shaken in paper money due to inflation and ballooning federal spending, many are turning to innovation. Even nations themselves have begun to set up strategic reserves. In fact, the United States is the largest known state holder of Bitcoin – once again positioning America at the forefront of monetary evolution.
As John Adams advised in 1787, “All the perplexities, confusion and distress in America arise not from the defects of the Constitution, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit and circulation.” It is incumbent upon Americans to arm themselves with knowledge and engage in the age-old American tradition of challenging broken systems with better ideas in the pursuit of liberty.
This article was originally published by RealClearPolitics and made available via RealClearWire.
Logan Beirne serves as the chief legal officer at Strive and is the bestselling author of “Blood of Tyrants.” He teaches corporate law at Yale Law School.
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