Nick Szabo  🔑

Gold has severe flaws. Physical locality makes it less secure and far more transactionally local, and thus more vulnerable to politics and less sound, than we can now achieve with Bitcoin, with good key management and taking advantage of its trust-minimized global settlement.https://twitter.com/MrHodl/status/991676293052813312 …

Probably the biggest flaw with the monetary metals (gold, sil er, and copper) is that they are costly to assay/validate. This led making people vulnerable to (i.e. requiring them to trust) centralized entities such as coin minters and bank note issuers, said trust often abused.

Bank notes further increased trust, i.e. vulnerability. to the actions of third parties. Gold came to be held in centralized vaults, and IOUs for much more than the gold actually held were issued -- fractional reserve banking (FRB).https://twitter.com/bitstein/status/1145438009636085760 …

Governments helped set up the largest banks, which printed even more bank notes and used them to buy government debt. These banks became (Bank of England) or were set up as (Federal Reserve) note-issuing monopolies, which we now call central banks.

Eventually default turned these gold IOU paper notes into fiat. BofE started refusing to honor its notes in 1931. The Fed reduced the amount of gold it would redeem a dollar for in 1933, restricted gold trade by targeting the centralized bank vaults, and went full fiat in 1971.