The question "What is money?" doesn't seem particularly tricky for many people at first glance, as money is something we use almost every day. Most people probably think of coins or banknotes when they hear the word "money".
But on closer inspection, you can see that we can use the term "money" in different ways, based on the different functions that money has.
Money is a generally accepted means of exchange and payment and is used for the exchange and purchase of goods and services. It is also a measure of value and price as well as a unit of account, as it is used to evaluate and compare goods and services. Money as a store of value means that the money received for the sale of goods and services stores the service rendered.
As a means of exchange and payment, money facilitates trade by solving the problem of the "double coincidence of needs" that can occur in barter trade. In reality, it is not always the case that the needs of two trading partners coincide so that trade can take place. Money solves this problem.
Example: Anna has an apple tree in her garden and Bert is a beekeeper and has a lot of honey left over. Trade will only take place if Bert has a need for apples at the same time as Anna has a need for honey.
Money as a unit of account simplifies economic life considerably because it makes the value of goods comparable. Without money, the individual exchange ratios would always have to be determined. Eggs for apples, apples for honey, eggs for honey, apples for salt, etc..
With 10 goods that would be 45 different exchange ratios, with 100 goods 4950 and with 1000 goods even almost 500,000 different exchange ratios. Who is supposed to keep track of all this?
With money as a unit of account, very different things can be compared with each other, such as the price of labor with the purchase price of a new car.
Money as a store of value allows us to save value over a longer period of time (e.g. for larger purchases). As a rule, there is a longer period between the sale and purchase of goods and the money received for the sale of goods (or labor) stores the service rendered. The prerequisite for this is stability of the value of money, i.e. it does not lose purchasing power due to price increases. If there is no price stability, a buyer will receive fewer goods than he has supplied himself when he buys them later. As a result, the means of payment function of money is jeopardized.
Under normal conditions, i.e. in times of stable money, the aforementioned functions occur simultaneously. Under abnormal conditions, this is not the case.
For example, during the period of inflation in Germany at the beginning of the 1920s, the dollar was the unit of account, the mark was the means of payment and real assets or foreign currencies became a store of value.
A currency is a guarantee and describes the constitution and order of money in a state. An important difference between money and currencies is their value. Money usually has a constant and unchanging value. A currency, on the other hand, is only a representation of a value. This can change and adapt over time. A currency is anchored in the monetary system via a legal framework and is usually issued by central authorities, usually states or so-called currency unions. However, individuals or groups can also create their own types of money. In this case, we also speak of a currency.
For thousands of years, people were content to exchange their goods directly for other goods. A baker produced his bread and could exchange part of his production directly for milk or hides. Today we would say that goods acted as a kind of currency. The problem here, however, was that there always had to be a "double coincidence of needs". This means that both parties always had to have a need at the same time for the exact good that the other party had to offer.
In 2000 BC, people began to agree on a common money, "gold"!
The reason was clear:
Gold fulfills all three characteristics of money.
Bitcoin does not yet have all the characteristics of money, but it has the best prerequisites to become money one day.
Bitcoin is limited to 21,000,000 BTC, if you want to be precise, only to20.999.999,97690000BTC, which makes it the rarest commodity on earth.
This will never change unless a global social consensus decides otherwise, which is becoming less and less likely as the network grows. That is the power of decentralized systems.
Bitcoin is therefore the "hardest" money and, according to the Austrian school of economics: "In a free market, the hardest money will automatically win".
Bitcoin is therefore fundamentally a good store of value!!!
Of course, you could now cite volatility to contradict this. However, you should be aware that Bitcoin is currently still in the early stages of becoming money and volatility automatically decreases as usage increases.
Bitcoin is also a very good transportation medium: it is much easier to transport than gold, for example, and can be transported over enormous distances in a very short time with minimal effort.
Two fundamental characteristics that Bitcoin still lacks in order to be regarded as fully-fledged money are general acceptance and its function as a unit of account. Although there are more and more people who use Bitcoin and recognize it as money, market penetration is still far too low to be able to speak of general acceptance.
Furthermore, apart from a few Bitcoin enthusiasts, Bitcoin and Satoshis are not yet used as a unit of account. Even in designated stores such as www.shopinbit.de or www.satoshigoods.de, prices are quoted in euros and not in BTC or sats.
However, the possibility of dividing bitcoins into eight decimal places means that they can be denominated to such an extent that they can generally be used very well as a unit of account - as soon as acceptance continues to increase.
Is Bitcoin already money for you? Do you think Bitcoin will change our current monetary system? Discuss with us and write your opinion in our forum.blocktrainer.de.
