Unfortunately, too many people think that bitcoin creates an anarchist system that is outside the scope of law. Even modern Keynesians have been overly zealous in insisting that central banking is not possible with a gold standard (or other hard monetary system). The Bank of England is generally credited with the development of what we call central banking. In 1866 the Bank of England made loans using its discount window penalty rate of 10%. This process involved the Bank of England acting as the lender of last resort in a financial crisis that was stemmed off even though the currency was based on a fixed Sterling economy. The system was not a one-to-one peg but was rather a 25% reserve but even as such it was a fixed reserve.
19th-century central banking had several problems resulting from a bimetal system with both transfers in sterling and gold. This led to problems outside the scope of this article.
The current iteration of the US Federal Reserve was birthed in 1913. This allowed the US to enter the international money exchange standard. This wasn't a true gold standard as people argue but was an exchange standard that is rightly referred to as the gold exchange standard.
After start of the US gold exchange standard, the US dollar was pegged 25% or more to gold. Later, in 1971 when Nixon had the US leave the gold standard, it was discovered that the US had under 5% gold reserves. It was not the gold reserve policy that failed but rather the fed's mismanagement.
"The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts."
— Satoshi Nakamoto
As with all periods in history, government saw value in demurrage and this led to an easy money policy.
The Keynesian argument the gold standard naturally leads to financial crises is flawed. The concept of liquidity shortage crisis in a pegged monetary system is a political problem. The British system with the Bank of England did not suffer a liquidity shortage crisis after 1866.
It is very simple to see that historically central banks existed and operated fairly well on a gold standard. The failures of the standard were not the pegging of a currency to a fixed supply, but rather a combination of bimetalism with fluctuating commodity exchange rates and the true evil, the ability of the government to short-change the system. It was not that money was pegged to resulted in the US defaulting in 1971, but rather the breach of the agreement between the government and the people. In reducing the amount of gold held in reserve from more than 25% to under 5%, the government effectively embezzled the wealth of the nation in a secret tax paid for by worthless paper.
Very few people seem to read past the headlines anymore. The message embedded into the bitcoin blockchain is a perfect example of this. Very few have actually read the article do not understand the basis of what it means. Some friends of mine took some points that I'd written a while back and wrote the following article that details this:
The fact of the matter is that bitcoin is not anti-banking. In fact it is not even anti-central banking. What bitcoin does is take banking to a place it is never been before, one where we do not need to trust politicians not to debase the currency as they have throughout history. Bitcoin does nothing to stop central banking at all. A fully Keynesian bank can be set to run a purely bitcoin economy.
I'm about as far from being a Keynesian as anyone could be, but at the same time I will tell you that bitcoin does nothing to stop a Keynesian monetary policy. A central bank basing its holdings completely on bitcoin is possible to be imagined. The only real difference with this system from what we have now is honesty. The government can take out loans in the same manner that they do today, and they can inflate the currency in the same manner that they do today but the difference is that the results of their actions will be immediately seen and not hidden for a time when it is politically expedient in the future and when it is other people's problems.
A Central bank based on bitcoin has the benefit of not being able to be secretly debased. In this, politicians cannot sell the future for the short-term gains they seek. It means that they need to explain why they have a loan
but it does not mean that they cannot loan money. The future of a system created using bitcoin is one of global liquidity and movement of currency. This is something frightens politicians. They cannot lie to the people about the economy. You cannot print more money to have a short-term illusion of wealth, rather as capital leaves the country the impact of a bad economic policy from government is immediately felt. With bitcoin, politicians cannot sell the future of our children for the gains of a political elite now.
Too many people of jumped on the bandwagon thinking that bitcoin creates a new society all of its own. I'm sorry to tell you in this you were deluded. No crypto currency does this and no crypto currency will ever replace central banking. You may not like what I'm saying here but the function of central banking is not one that is removed through the addition of a hard money. As stated above central banks all started on hard money systems.
The simple reality is that bitcoin is a peer-to-peer electronic cash system. It is a value transfer system. It is not and will never be a means to implement anarchy or a system without government. If you want these, you need to look somewhere else. Bitcoin does not help you. What bitcoin does is more important.
Bitcoin makes government accountable. Bitcoin makes politicians accountable. Bitcoin makes central banks have to honestly report the position of the currency. This means, unlike conventional currency with trust as needed, we can hold our own money in the form of cash. Rather than trusting that the value of our gold certificate has not been eaten away through a slow debasement, in bitcoin we have something that is a form of cash that remain steady across time and space.
I am sorry to burst people's bubbles, but the truth is that banking does not disappear because of bitcoin. Bitcoin is not a bank, it is cash. If you own cash and do nothing with it in time your holdings will go to nothing. The only way long-term to make an economy work is to invest. The function of banks is to consolidate investment. Many people put small amounts together allowing the bank to make loans and invest in fledgling companies. There are Market solutions for this, but they only apply to certain forms of industry. If you want to start a new plumbing company, you go to a bank rather than trying to raise capital at market.
Bitcoin does not destroy or tear down anything. It is an evolution not a revolution. If you cannot understand this I'm sorry but I cannot explain more but that does not change the truth of the system.

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What a great post - excellent work!