The gold standard is a monetary system that stipulates that the value of certain currencies is equal to a certain weight of gold. This system was established by the United States in the mid-19th century. Why use gold? Of course it is because of the value generated by its scarcity. However, after implementation, some shortcomings were found:
- Gold is expensive
- The gold standard is inflexible
- When every country pursues the gold standard, it means that the exchange rate between their currencies is fixed. There will be a problem. Once a problem occurs in a certain country, it will have a knock-on effect.
Without the three shortcomings mentioned above, the gold standard is the right way. Imagine an ideal world. Its economic activities are sometimes hot and sometimes cold, and even change drastically. But the central bank in this world has a magic method. It can be best that every country’s central bank uses the same method and treats the same one. Gold mining, and the speed of gold mining remains the same. Naturally, all countries can use the same currency for transactions. I think the Bitcoin designed by Satoshi Nakamoto is to create this ideal world.
The answer is that Bitcoin uses the sophisticated design of the underlying technology of the blockchain to limit the output of Bitcoin to create scarcity, just like we dig rare gold to make money generate value.