Can a Bitcoin similar to the Spanish silver dollar be successfully replicated?

Author: Nick Philpott, Bitcoin Magazine; Compiled by: Songxue, Golden Finance

Many commentators compare Bitcoin to gold, the idea being that its limited supply makes it an attractive long-term store of value. There are historical records of widespread adoption of gold currencies, such as those of the British Empire's sovereigns and semi-sovereigns. However, the adoption of sovereignty was often driven and directed by the British imperial government, often troubling local administrators who often faced currency shortages. Bitcoin has no country to support its adoption, so comparing it to gold sovereignty is untenable. One of the most widely used silver currencies in the world, the Spanish silver dollar, may provide a better comparison.

The Spanish silver dollar, originally called the "real," was unusual because it flourished as a trade currency at the same time that Spain, where it was produced, declined. Additionally, it was adopted in countries that were never Spanish colonies. The three main factors behindthe real’s success are its sufficient supply, high quality and verifiability.

The real was born in 1497, five years after Columbus landed in America, when King Ferdinand and Queen Isabella reformed it with the "Edict of Medina del Campo" Spanish monetary system.

Fifty years later, in 1545, the Spanish discovered the Potosí Mountains in present-day Bolivia, the richest silver deposit in the history of the world. Due to a shortage of currency, the Spanish Crown allowed the minting of reals in New Spain in 1535. Meanwhile, Portuguese explorers not only discovered routes to the Indies and China, avoiding the Arabs and Venetians who traded gold. Demand was particularly high in China due to a shortage of bronze used in Ming coins, forcing merchants to find substitutes. Demand for silver soon exceeded supply from China and Japan, creating a ready market for the regular shipment of reals from the colony of New Spain to another Spanish colony, the Philippines.

Its adoption spread throughout the Americas, and by 1792 it had become the de facto currency of the newly independent United States. In fact, when the U.S. dollar was first issued, it was pegged to the real. The growth of the Spanish Empire provided distribution and availability to the Americas and Asia, which was the first step in its success.

The second factor is that the Spanish government ensures that the quality of the real remains consistent, which in turn means that its value remains stable. Unlike many other currencies of the era, the real's devaluation was very limited. However, while the real remains strong, Spain's domestic economy is weak. Efforts to combat inflation, some of which involved devaluing the domestic velon coinage, discouraged exports and encouraged imports, further weakening the Spanish economy. These policies, combined with the demands of the ongoing conflict and profligate royal spending, eventually led to the export of large quantities of silver reals to other parts of Europe. Other European countries, notably the Netherlands and England, were keen to compete with the Spanish Empire and so needed silver to buy tea, silk and spices from China and Asia. The early British East India Company initially attempted to sell heavy woolen cloth in India and China but, not surprisingly, had very limited success. It's much easier to use Silver Real.

The final factor in the success of the real is verifiability. Other countries have tried to copy the real, but even foreign currencies of equal quality and weight have been rejected by Chinese and Asian merchants. The United States is such an unsuccessful competitor. In 1872, the U.S. Treasury Department noted that while the real held a 6-8% premium in East Asia, U.S. silver suffered a 2% discount. Therefore, in 1873, the United States Coinage Act authorized the creation of an American "trade dollar." The new coin was dubbed the "Eagle Dollar" for its bald figure. The United States is expected to make profits based on the sovereignty, as they believe most Eagle Dollars will never cross the Pacific back to where they can be redeemed.

Eagle Yuan has had some success. Although supported by Emperor Tongzhi, it was adopted to some extent in southern China, but not in the north. To add to the disappointment, as the value of silver declined, Eagle Dollars began to reappear in the United States containing less silver than their face value, leading to redemptions. It was gradually phased out, and in fact, starting in 1873, many countries began transitioning to the gold standard.

The question therefore remains:Whether Bitcoin can be considered a trade currency without any country. Like the silver dollar of Spanish America, Bitcoin is in principle abundantly available because it exists on the open Internet. Just like the silver coins of Spanish America had a consistent weight and purity, Bitcoin has a consistent design and structure. The math that underpins Bitcoin is the same in any country. The silver dollar of Spanish America was de facto branded, making it easily identifiable to its holder, andBitcoin is easily verifiable because it exists on a public ledger with a hashed immutable structure. SIt took about a hundred years for the silver dollar of Spanish America to gain its recognition and status, and Bitcoin may do the same at some point in the future. Despite the criticism regarding Bitcoin’s suitability as a means of exchange, this much is undeniable: Bitcoin shares the successful characteristics that supported the silver dollar’s ​​adoption in terms of accessibility, quality, and verifiability.

It is remarkable that a currency can be widely adopted when its home country is in decline. That Bitcoin has achieved this without the backing of a physical home country is even more remarkable.