At its core, money is a social technology. It’s not a natural substance like gold or water—it’s something humans created to make exchange, trust, and measurement possible in large societies. Economists usually describe money through three primary functions:
Medium of exchange – Money lets people trade without bartering. Instead of swapping goats for grain directly, you can sell a goat for money and later use that money to buy grain—or anything else. This removes the “coincidence of wants” problem.
Unit of account – Money provides a standard way to measure value. Prices, debts, and wages all become comparable when expressed in a common unit (like dollars, yen, or euros).
Store of value – Money preserves value over time. You can work today, save your wages, and spend them later. (Of course, inflation or instability can weaken this function.)
Historically, money has taken many forms:
Commodity money (things with intrinsic value, like gold, silver, salt, or cattle).
Representative money (paper backed by commodities—like the gold standard).
Fiat money (modern currencies not backed by a physical good, but by government decree and trust in stability).
Digital money (bank deposits, credit entries, cryptocurrencies).
The unifying element is trust. Money only works because people collectively believe in and accept it. Without that shared belief, the tokens—metal, paper, or digital bits—are just objects.
Sponsored by ChatGPT.