What is Money?

Today is Sunday, and I want to share with you a special letter with a new idea.

Last ideas I share with you are:

• Scarcity 

• The Sure Path to Prosperity (Time Preference)

• The Cost for Sure Path to Prosperity (Opportunity Cost)

What is Money?

A medium to exchange goods and services.

It takes various forms, including coins, banknotes, or even numbers in bank accounts.

Regardless, all forms fulfill their function of being universally acceptable in transactions.

Money can hold intrinsic value, like gold or other precious metals..

..or it may derive its worth from trust and the promise that it's an acceptable medium of exchange for goods and services.

This assurance often comes with backing from a government or a financial organization that issues the currency, theoretically guaranteeing its value and stability.

Money, as a universal language, facilitates the exchange of goods and services, transcending both linguistic and cultural borders.

Regardless of your location or linguistic competence, possessing an internationally recognized currency allows you to engage in transactions.

A historical example is the acceptance of Kent cigarettes as a form of payment during the era of communism, where this unconventional 'currency' was used in the exchange of goods and services.

Functions of Money

Money should fulfill the following functions:

1. Medium of exchange;

2. An unit of account;

3. Store of value;

Let's take them one by one.

1. Medium of Exchange

Money operates as a medium of exchange, simplifying the trade of goods and services.

With money, there's no need to find someone specifically interested in what you have to barter.

The availability of money provides the freedom to buy and sell as desired.

2. An unit of account

As a unit of account, money provides a universal standard that aids in expressing and comparing the value of goods or services.

This mechanism brings efficiency to markets, enabling people to make well-informed decisions.

For example, if you're planning to buy a house, you'd compare the prices of different houses in various areas during your research.

Without money as a unit of measure, evaluating the value of houses would be challenging.

Hence, money, with its versatility, is considered one of the most innovative technologies.

3. Store of Value

Money should, at the very least, retain its value over time, serving as a useful tool for savings and representing the investment of human labor.

This characteristic enables individuals to use money effectively in planning for the future.

(Bitcoin is a good savings and store of value tool)

All these functions have helped economies grow and develop.

Without money, circulating goods and services would be significantly more challenging, resulting in a less developed society.

However, all FIAT (government-issued) money does not maintain its value over time.

Bitcoin solves this.

Thank you for your time,

Mr Go Brr..

P.S. Bellow you can find some links to learn more about “What is Money”:

• Functions of Money (Khan Academy)
  

• Could Bitcoin Be the Best form of money? (Ted Talk)
  

• The Origins of Money (Nick Szabo, 2002)