What is Money?

Money Is Simply a Way to Hold and Exchange Value Among Humans

We do things to generate value in the world…. we produce a product, peform a service, grow food, cook food, make art, play music… the list is endless. So what do we get back for sharing our skills and talents into the world? We get something to store value over time when we need it. In the past that could have been beads or shells, or gold coins. Over time that morphed into more convenient, but more abstact things, primarily pieces of paper. Yes, humans imparted into pieces of paper the store of value. If the paper says 10 that means one thing and if it says 100, that means something better. You think Bitcoin is weird, have you ever stopped to think about paper money?

Three uses of Money

While we all know inherently what money is, it’s helpful to list out the different functions to help us think about and talk about money. Those are Store of Value (SoV), Medium of Exchange (MoE), and Unit of Account (UoA).

• Store of Value

• Medium of Exchange

• Unit of Account

Four Things we can do with our resources

So when we accumulate that value for our skills and talent, there are basically four things we can do with our resources: consume, save, invest, or share. Consume and share seem pretty straighforward. Save implies we want to conserve that value as much as possible to use it in the future. Invest means we are going to lend that resource, or capital, out to someone to do something productive and hopefully get more back in the future.

Characteristics of Money

• Uniform

• Fungible

• Durable

• Divisible

• Portable

• Acceptable

• Limited In Supply - Hard money vs. Soft Money