we have become accustomed to something around us and never question its rationality, demonstrating the power of cognitive inertia. For instance, currency released by the government for payment and wealth storage. Before Bitcoin appeared, we seldom doubt the reasonability of currency. Bitcoin offered us a brand new solution, which is way better than the current one. In this way, we are inspired to think about whether the current system is appropriate.
In fact, everything has a life cycle, containing birth, growth, maturity, decay, and death. If we can look at the development of things from their life cycle, more enlightenment is available. It's just been 12 years since Bitcoin emerged, the earliest stage in life cycle, facilitating the boom of encrypted digital currency. Correspondingly, paper money is gradually fading. I believe in the next two decades, cryptocurrency issued by private company and legal electronic currency launched by the central bank will replace paper money. Perhaps, in the few decades to come, paper money will indeed disappear.
Paper money, that is, cash, is the currency we use most frequently in daily lives. So how did it come into being? Can its history inspire the current Bitcoin? About the former, the bank note from the Bank of England is crucial, whose 300 years' history can basically represent that of paper money.
In the second half of the 16th century, the word "banker" showed up in Britain, referring to merchants who were specialized in currency exchange. Then, the main currency were gold coins or silver coins, rather inconvenient for carrying and storing, especially for businessmen. Therefore, people would find a safe place for those coins, and the most suitable place was the goldsmith’ shop.
Businessmen put coins in these shops of London. The goldsmiths took care of the wealth and charged some fee and issued a paper receipt by which the depositor could exchange for gold or silver. This kind of receipt is actually a private contract with no legal effect. If one goldsmith enjoys a good reputation, then the receipt issued by his shop is easier to be accepted for circulation. In this way, receipts began to move around in the market. That is the rudiment of the earliest banknote.
A hundred years of development saw the progress of London's goldsmiths' shops: they gradually developed into a full-time financial service institution that absorbed deposits, granted loans, issued deposit notes and opened checking accounts, evolving into the earliest bank. However, as more and more gold and silver coins were saved in those shops, deposited funds were formed. Since not all coins needed to be exchanged, goldsmiths would keep a small part of them for exchange and a large portion for loan of high interest rate, creating lending business.
Huge profits lured goldsmiths to arrest more depositors for expansion, they decided to pay a certain amount of interest to the depositors. When deposits came, the goldsmith would set up a recipient, the earliest bank note. Similar to receipt, deposit note was used to exchange for gold and silver coins, the difference is that the note had interest whereas recipient had not. Slowly, a complete financial services got shaped.
Together with metal coins, bank notes soon earned a place in the market by virtue of its convenience in circulation, storage and exchange, rising to be a kind of quasi-money, the earliest paper in the United Kingdom.
In July 1694, to help the royal government raise war funds, the Bank of England was established. It publicly subscribed for 1.2 million pounds with 8% of interest rate and obtained the right of releasing bank notes of the same amount. The 1.2 million pounds was the entire capital of the Bank of England and the creditor's rights of the capital shareholders to the royal governor. In essence, the original notes of Bank of England were national debt issued by the royal government.
Although the debtor behind the Bank of England notes was the royal government at the time, it was not legal tender and the Bank of England did not enjoy the monopoly on the issuance of them. Then whether a bank note was accepted depended on people's trust level, it's not a mandatory legal requirement. As a guarantee, the notes were redeemed with royal government taxes, their acceptability was significantly better than others. Meanwhile, the Bank of England was approved by the Parliament and had certain public attributes, making it more popular among businessmen. Gradually, its notes became mainstream.
After the outbreak of WWI, the British government ordered the Bank of England to suspend the free exchange of paper money and gold. In 1928, its Parliament passed the Currency and Banknotes Act, legally confirming the Bank of England as the only currency issuing agency in the country. In more than 200 years, the Bank of England notes completed finished the unification of paper money. In 1931, Britain totally get rid of the gold standard and the notes of Bank of England became the successor---the legal credit paper money. Later are the Bretton Woods system since 1944 and the Jamaican currency system since 1973.
Hopefully, those words above will give you some inspiration. Here's my notion:
1. No monetary system is fixed. Human beings always tend to refine their system;
2. The evolution of any currency system can not accomplished overnight;
3. The issuance of banknotes needs value support. At the beginning, they are merely exchange certificates for gold and silver coins, and gradually they get circulated in the form of currency;
4. Our current pure credit currency system is unreasonable. Accumulating contradictions will surely renew it;
5. Bitcoin is the best value storage carrier. Bitcoin itself is valuable. Future currency will also be anchored by Bitcoin;
6. With the continuous strengthening of Bitcoin's global consensus, Bitcoin will surely become the super-sovereign currency and world currency that anchors the human currency and financial system.
They are my ideas got from the history of paper money. Search more about it if you're interested. I believe you will surely get more inspiration. To learn Bitcoin, the most basic history of currency is required. What do you think?