The evolution of the monetary system: from gold to stablecoins

# What Is Money?  

By Jacob Wittman, Legal Counsel at Plasma  

Translated by AiddiaoJP, Foresight News  

In July 1944, as World War II neared its end, representatives from over 40 countries gathered in a small town in New Hampshire to answer a seemingly simple question: What is money, and who controls it? The Bretton Woods Conference was neither the first nor the last time global leaders debated this issue. Those discussions about gold, the U.S. dollar, and exchange rates laid the framework for the modern global financial system.  

For thousands of years, every major monetary revolution has revolved around a fundamental question: What gives money its value? Debates over the value of money often center on two core attributes: sovereignty and scarcity.  

In reality, every monetary revolution is less about the physical form of money and more about trust, power, and the "rules of the game." Stablecoins represent the latest direction of this ongoing revolution—one where trust and power are increasingly decentralized. We believe stablecoins are currently the most impactful form of money.  

## The Era of Commodity Money  

The earliest known forms of money were commodities, such as gold, silver, cowrie shells, and salt. These items possessed intrinsic value or widely recognized worth, derived from their physical scarcity. For instance, gold has a limited supply and can only be obtained through mining—a process that is both difficult and costly.  

Scarcity fostered credibility. If you held a gold coin, you could trust it as a reliable "store of value," because no government or banker could simply print more gold out of thin air.  

On the Micronesian island of Yap, money took the form of massive limestone disks, some weighing several tons. Quarried from Palau, the value of these stones depended on their size, the difficulty of transporting them, and their origin. Notably, ownership was tracked through community consensus rather than physical movement—proving that the power of money stems from shared belief, not inherent value.  

Yet this form of money had inherent limitations. Commodity money was heavy, hard to transport, and inefficient in a rapidly growing global economy. These physical constraints hindered payment efficiency and held back economic growth. Long-distance trade demanded a system that could transcend the weight of metals and the limits of capital.  

## The Shift to Fiat Money  

Eventually, the combined forces of globalization and industrialization led to the decline of commodity money. Governments stepped in, introducing fiat money. Paper currency, which initially could be redeemed for gold or silver, gradually became widely accepted as money in its own right. The Bretton Woods system institutionalized this ecosystem by pegging the U.S. dollar to gold and tying other global currencies to the dollar.  

This monetary system functioned roughly for 25 years. However, by the late 1960s, U.S. gold reserves could no longer support the dollar’s global dominance. In 1971, President Nixon suspended the convertibility of the dollar to gold, ushering in the era of unbacked fiat money.  

In this new phase of money, value derived from sovereign credibility rather than material scarcity. The U.S. dollar has value because the U.S. government says it does—and because markets and foreign governments trust this claim. Trust shifted from being backed by physical assets to being supported by politics and policy.  

This profound transformation granted countries powerful tools: monetary policy became a core lever for economic management and geopolitical strategy. Yet fiat money also introduced vulnerabilities, such as inflation, currency wars, and capital controls. In some cases, flexibility and stability stood in opposition. Today, the central question surrounding most modern currencies is not "who can create money," but "can those in power be trusted to maintain its value and utility over the long term?"  

## The Digital Representation of Money  

The rise of computers and the consumer internet raised a critical question at the intersection of electrical engineering and finance: Can money be represented digitally in the digital world?  

Projects like Mondex, Digicash, and eGold—launched in the 1990s and early 2000s—were early attempts to answer this question. They promised new forms of electronic payment and value storage, but ultimately failed due to regulatory pressure, technical flaws, and a lack of trust and product-market fit.  

Meanwhile, electronic banking, credit cards, payment networks, and settlement systems became ubiquitous. Importantly, these were not new assets—they were new representations of fiat money, designed to be more scalable and better suited to the modern world. Yet they still relied on the same framework of institutional trust and policy, and crucially, depended on closed technical systems and operational networks run by rent-seeking intermediaries.  

## The Emergence of Stablecoins  

Stablecoins build on this dynamic but shift power away from corporations by leveraging open, permissionless infrastructure. Fiat-backed stablecoins are hybrid by design: they inherit the credibility and efficiency of fiat money while embracing the programmability and global accessibility of digital systems.  

By pegging stablecoins to reserve assets redeemable at par value, their value remains predictable—backed by the credibility of sovereign nations like the United States. Issuing them on public blockchains enables instant settlement, 24/7 operation, and frictionless cross-border transactions.  

We believe the emerging regulatory framework for stablecoins—an intrinsic part of their "monetary nature" today—should align with our core principles for how stablecoins ought to serve users:  

- **Permissionless**: Individuals should control their digital assets, free from onerous, arbitrary account restrictions imposed by intermediaries.  

- **Borderless**: Geography should not determine whether someone can send or receive payments, nor the time it takes for payments to be sent or received.  

- **Private**: Consumers should be free to engage in commerce without fear of unwarranted surveillance by governments, the private sector, or other consumers.  

- **Trustlessly Neutral**: Global capital flows should be free from discrimination, allowing people of all backgrounds to save and spend U.S. dollars as they see fit.  

## Conclusion  

Stablecoins represent the next step in the long evolution of money. Like traditional fiat currencies, they rely on sovereign credibility—but unlike the electronic forms of fiat that preceded them, stablecoins separate trust in sovereignty from trust in corporate power. The best monetary assets thrive on the strongest monetary technologies and networks.  

## Disclaimer  

The views expressed in this article are solely those of the author and do not constitute investment advice for this platform. This platform makes no guarantees regarding the accuracy, completeness, originality, or timeliness of the information in the article, nor does it assume any liability for any losses arising from the use of or reliance on the information contained herein.