Money is both a physical and virtual technology and means of communication based on trust. Once it is trusted, it is adopted creating a trusted money network among participants. In our case, the US dollar is trusted globally as money, thus it is used by a network of individuals, businesses, and banks worldwide.
Money (aka medium of exchange, store of value, & unit of account) was invented at least 10,000 years ago for setting prices and ownership claims. “Being a medium of exchange is the quintessential function that defines money,.. it is a good being exchanged for other goods” (R1) Sovereign money allowed buyers and sellers to peg a numeric value to “units of account” (assets, liabilities, goods, and services) which moved trade from barter to commerce between regions and eventually nations, because transactions could be settled and accounted for.
Value tied to these units of account often represent some form of future productivity.
Common properties of money:
- – Store of value
- – Unit of account
- – Medium of exchange
When you have these three things a trusted network is created where that money is used. For example, the USD is a global money network because it is used around the world for goods & services. Of course other money exists, but the USD is the standard because it is backed by the US financial system, the US economy, & the US military – all of which are the largest in the world.
For digital assets like Bitcoin & Ethereum – being both scalable and secure are also very important additions to this definition. As of 2022, volatility keeps these digital assets from being considered money off-chain.
Money Throughout the Ages: *https://www.youtube.com/watch?v=r5eFObOFcME
(R1) The Bitcoin Standard by Saifedean Ammous (Pg#3) https://en.wikipedia.org/wiki/Unit_of_account
Title picture: Photo by Alexander Mils on Unsplash« Back to Glossary Index