What is money?

In July 1944, as World War II drew to a close, 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 explored this question. Debates over gold, the U.S. dollar, and exchange rates shaped the architecture of the modern global financial system.

For millennia, every major monetary transformation has revolved around a core question: Where does the value of money come from? Debates over monetary value often involve its sovereignty and scarcity.

Each monetary transformation is less about the physical form of money and more about trust, power, and the rules of the game. Stablecoins are the latest manifestation of this cycle, where trust and power appear to be decentralizing. We believe stablecoins are the most influential form of money.

The Era of Commodity Money

The earliest known form of money was commodities, such as gold, silver, shells, and salt. These items were used due to their intrinsic or widely recognized value, derived from their physical scarcity. For example, gold has limited supply, requires mining, and the mining process is both difficult and expensive.

Scarcity creates credibility. If you hold a gold coin, you can trust it as a reliable "store of value" because no government or unscrupulous banker can create more gold out of thin air.

On the island of Yap in Micronesia, money took the form of large limestone discs, some weighing several tons, mined from Palau. Their value depended on size, transportation difficulty, and origin. Since ownership was tracked through community consensus rather than physical movement, these stones demonstrated that the power of money comes from shared belief, not intrinsic value.

However, this form also had limitations. Commodity money was bulky, difficult to transport, and inefficient in a rapidly growing global economy. These physical constraints hindered payment throughput and stifled economic growth. Long-distance trade required a system that could transcend the weight of metals and capital limitations.

The Transition to Fiat Money

Eventually, the combination of globalization and industrialization pushed commodity money to its limits. Governments stepped in and introduced fiat money. Initially convertible into gold or silver, paper money gradually became widely accepted as money itself. The Bretton Woods system established this ecosystem by pegging the U.S. dollar to gold and other world currencies to the dollar.

This arrangement lasted about 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 into gold, ushering in the era of pure fiat (without physical backing).

In the next phase of money, value came from sovereign credibility rather than material scarcity. The U.S. dollar had value because the U.S. government declared it so, and markets, households, and foreign governments believed it. Trust shifted from a physical foundation to a political and policy foundation.

This profound change provided nations with powerful tools. Monetary policy became a core lever for economic management and geopolitical strategy. But fiat money also introduced vulnerabilities like inflation, currency wars, and capital controls. At some level, flexibility and stability are opposing forces. Today, the core question surrounding modern monetary structures is not who can create money, but whether those in power can 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 an important question at the intersection of electrical engineering and finance: Can money be represented in the digital world as bits?

In the 1990s and early 2000s, projects like Mondex, Digicash, and eGold attempted to answer this question, promising new ways of electronic payment and value storage. Ultimately, they failed due to regulatory pressure, technical flaws, and a lack of trust and market fit.

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

Enter: Stablecoins

Stablecoins leverage this dynamic but shift power away from corporations by using open, permissionless infrastructure. Fiat-backed stablecoins are inherently hybrid. They inherit the credibility and efficiency attributes of fiat money while leveraging programmability and global accessibility.

Pegging stablecoins to reserves redeemable at face value, backed by the credibility of sovereign nations like the U.S., makes value predictable. Issuing them on public blockchains enables instant settlement, 24/7 operation, and frictionless cross-border movement.

We believe the emerging regulatory framework for stablecoins—an intrinsic part of their "moneyness"—should align with our core principles on how stablecoins serve users.

Permissionless: Individuals should control their own funds without burdensome restrictions arbitrarily imposed by intermediaries on accounts.

Borderless: Geographic location should not determine whether someone can send or receive payments or how long it takes for payments to be sent or received.

Privacy: Consumers should be free to engage in commerce without fear of unwarranted surveillance from governments, private sectors, or other consumers.

Credible neutrality: Global monetary flows should be free from discrimination, allowing people of all backgrounds to freely save and use their property.

Conclusion

Stablecoins are the next step in the long evolution of money. Like traditional fiat money, they rely on sovereign credibility. But unlike earlier forms of electronic fiat money (and the payment systems that transmitted them), they decouple trust in sovereignty from trust in corporate power. The best monetary asset, built on the best monetary technology and networks.