Currency! It’s a Big Deal.

From Currency to Blockchain

Photo by Steve Johnson on Unsplash

This short article attempts to understand how a sound Currency should be. It excludes the digital transformation because that is another chapter that I will cover later. In upcoming articles, I will also cover the evolution of Coinage and, finally, blockchains. This article and upcoming ones will be a short series of the basics of Cryptocurrency, and I hope you enjoy reading it.

So, any sound currency should have three essential features:

It should be a suitable medium of exchange
It should be a unit of account
It should be a store of value.

So, what is a good medium of exchange?

Medium of Exchange:
If we go back to old times, any physical matter that can enable an exchange of products or services is called a medium of exchange.

So a medium of exchange can be anything such as rice, metals, stones, gems, etc. Nowadays, we call it national Currency. If you exclude the digital format of Currency, then a suitable medium of exchange should be durable, easy to transport, fungible, resistant to counterfeit, and divisible into smaller denominations.

Unit of account:

Similarly, a unit of account represents the value of an asset, product, or service. Often, price is associated with the value of any asset, so Currency is a suitable way to express the value of a product or service.

The stability of a unit of account is of utmost importance because it represents the value. So if volatility triggers in the short term, then it is not a sign of sound Currency. It should have long-term stability.

Store of Value :

A store of value is a process in which assets can be expressed and saved in one standard format and retrieved for a transaction. The store of value’s predictability is crucial to the stability of its future value as the demand and supply drivers affect its dynamics.

For example, Golds, Bonds, Silver, Diamond, Stocks, real estate, etc., are all stores of value, although the risk of loss of its value is always prevalent.

For now, we will wrap up this article because it is meant to be a short one. If you really like the content then, please share your feedback in the comment as it would help me to add more relevant content. In the next article, we will explore about Barter System and some interesting facts.

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