Magazine feature, published online September 6th 2013
As the financial crisis in Europe continues, could Bitcoin be the solution to our economic woes?
Before pounds and dollars, you could use solid gold in exchange for goods. There was a limited supply of gold, so its value was inflexible. When we started using the currencies we know today, their value was compared to that of gold; this was the Gold Standard.
But measuring currencies against the value of gold meant countries could not alter their own exchange rates – to make exports cheaper, for example. So, using political means, money became flexible. Fiat currencies now relied on a country’s creditworthiness, meaning centralised banks could control national economies and fund the state, by yielding power over money, exports and people. And it’s been that way ever since the start of the 20th century.