For centuries, humans across the globe turned to gold as a trusted form of money, primarily because of its unique properties—scarcity, durability, and costly to forge. Gold was mined, refined, and minted into coins by private parties and rulers alike. Kings, in particular, would imprint their images on coins as a symbol of their reign and authority.
But how did we transition from using gold, a scarce and valuable commodity, to relying on paper money that holds no intrinsic worth?
Gold, while highly valuable, was not easily portable, divisible, or convenient for everyday transactions specially when you have an economy that is growing and wants to scale. To solve this problem, people began storing their gold with goldsmiths and early bankers, who issued paper certificates—IOUs—representing the gold held in their vaults. These certificates allowed for easier exchange, as they were more practical than carrying physical gold.
However, the system had a centralized trust problem and soon became vulnerable to abuse. Many custodians realized they could issue more paper certificates than the actual gold they held, assuming that not everyone would demand redemption at the same time. They betrayed the trust the customer placed with them. This practice worked—until it didn’t. During economic downturns or moments of panic, when too many people attempted to withdraw their gold at once, the custodians couldn’t meet the demand. The result? Bank runs became a recurring crisis, exposing the fragility of a system built on trust rather than full backing.
Governments saw an opportunity to establish central banks and become the sole issuers and distributors of money. They enacted laws ensuring that only the government could print currency. Additionally, they mandated that all merchants accept this money and that taxes could only be paid using the government-issued currency. Regardless of whether a state is a monarchy or a democracy, the ruling class’s primary objective has always been to maintain and consolidate power. Historically, governments that exert absolute control over their citizens tend to remain in power longer. Governments maintain control by regulating three key areas: information, money, and weapons.
The internet disrupted government control over information. Before the digital age, access to information was largely restricted to state-controlled agencies. Private organizations or individuals who criticized the government faced severe consequences, including imprisonment. Even today, in most countries, media outlets—whether print, television, or radio—are either state-owned or heavily influenced by government regulations and policies.
Nowadays most people in every country distrusts information on these official channels as the state have tricked them with false information multiple times in history. The spy scandal in India 30 years ago was how a prominent paper destroyed the lives of people and made fools of people reading it. The New York times report on weapons of mass destruction was used by the US administration and congress to declare war on Iraq. The end result is death in millions and debt in trillions.
Once trust is destroyed people stop believing the news and every news paper except for Wall Street Journal is now in loss without enough readers to pay for it.
People trust their governments, whether they are ruled by monarchs or elected representatives. That trust then extends to government-issued paper money, creating a top-down hierarchical system of currency. This currency remains valuable only as long as the public believes in the government’s stability despite the fact there is no commodity backing this paper money.
When the U.S. Federal Reserve was established, the dollar was backed by gold—meaning that every dollar could be redeemed for a fixed amount of gold. This system provided a check on excessive money printing. However, the centralized nature of government-controlled paper money presents a fundamental problem. Governments, by their very nature, seek to stay in power, and to do so, they rely on welfare and warfare policies—both of which require massive funding.
To finance their spending, governments have two choices:
- Increase taxes, which risks rebellion or political backlash.
- Print more money, which acts as an invisible tax by reducing the value of existing money through inflation.
Faced with this dilemma, most governments opt to print money, slowly eroding the purchasing power of their citizens while avoiding direct political consequences. This is the core issue with fiat currency—centralization enables unchecked monetary expansion, ultimately leading to inflation, economic instability, and loss of trust in the system.
Powerful state actors design and implement welfare and warfare programs to maintain power. Welfare is free money distributed to certain people in the guise of equity, equality, or social justice, creating voting blocs. Warfare requires funds to pay for the expenses of soldiers and weapons.
The only reason the U.S. dollar has survived is because value or currencies are relative and that most other nations are also printing money without creating as much real wealth. Governments worldwide engage in deficit financing, borrowing and printing money to fund their spending. But this has consequences—inflation erodes the value of savings, crushing ordinary people who have stored their wealth in fiat currency.
If trust in the issuing government collapses, paper money becomes worthless—not even fit to be used as toilet paper. Trust is the only reason fiat currency functions. People accept it because they believe others will too.
Another major issue with centralized money is that governments and financial intermediaries can freeze, confiscate, or censor money at will.
This became evident during the Russia-Ukraine conflict, when the U.S. government seized Russian dollar assets and cut Russia off from the SWIFT payment network. This action sent a clear message to non-Western nations: your money is only safe as long as you obey the system’s rules.
Suddenly, U.S. allies and adversaries alike realized that the global monetary system could be weaponized. Countries began seeking alternatives to reduce dependence on the U.S. dollar and centralized financial rails.
Governments have not only seized foreign assets but also targeted their own people.
A prime example is demonetization, where governments declare certain currencies invalid overnight. This has happened in India, Venezuela, Zimbabwe, and other nations, causing financial chaos for ordinary citizens. Gold was confiscated even in the US the bastion of free speech and free market in 1933 by executive order from President Roosevelt.
These actions expose a fundamental flaw in centralized money: those who control the system can change the rules at any time, to serve their own interests, without consent from the people who rely on it.
Two of the key reasons why bitcoin gained popularity from a philosophical angle among the libertarians and cypherpunks is that it was decentralized and no one owns it.
Hence no one can print it at will and debase it or inflate it. The other key element being no one can stop you from transacting in bitcoin. The moment you have internet connectivity you can send and receive bitcoin. No central bank can stop you from transacting based on any criteria. It is a free market. Just like the internet, once you have a connection no one can stop you from accessing information across the globe. Even if they have firewall like in China, you can use a VPN network to bypass those firewalls and get the information you want.
This decentralized and non-censorable artifact that could not be duplicated and was online was the technological brilliance of bitcoin. It allowed the creation of an artifact online that could have ownership and could be transferred. More about this in the next article.
News Summary in the Crypto Space this week worldwide
Bitcoin prices have almost tanked 20% this week. Welcome to the world of crypto volatility. The markets once again proved trading crypto is not for the faint hearted. The emotions involved when your portfolio swings in a week by almost 20% is like listening to rock and roll. Read Here…
One of the main reasons for the market being crushed was the Bybit exchange hack by the North Korean Lazarus group for 1.5 billion dollars’ worth of Ethereum. This is the single largest hack in the crypto world or any world. Read Here…
Bybit offers 140 million as bounty to trace the funds. They are trying their best to challenge those evil hackers and thieves. Read Here…
The other reason for markets taking a beating is consumer sentiment being low and uncertainty in the market due to tariffs by US on Mexico, Canada and many other countries.
Citadel Securities one the largest hedge funds on the world making a move to get into the lucrative business of being a market maker for bitcoin. Read Here…
The SEC under new direction of a crypto friendly government is dropping actions against various exchanges and players in the industry. The Uniswap decision being a key one. Read Here…
As jobs opportunities disappoint, crypto trading gaining steam in smaller cities across India. This will most likely end up really bad. I personally warn readers that you should not be involved with your life savings into trading an asset that is highly volatile. Read Here…
One more crypto scam, the GainBitcoin scam unearthed and raids across the country. Please do not invest your hard earned money into scams Read Here…
Nithin Eapen is a technologist and entrepreneur with a deep passion for finance, cryptocurrencies, prediction markets and technology. You can write to him at neapen@gmail.com
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