Money is a commonly accepted tool that allows people to store value, exchange goods, and measure worth. It solves a fundamental economic problem — without it, trade requires a perfect double coincidence of wants.
Money enables an economy to run efficiently by giving everything a common unit of measurement — like a universal language for value.
Imagine you have eggs and want bread. Without money, you must find someone who simultaneously has bread AND wants your eggs. This is called the double coincidence of wants — and it's incredibly inconvenient.
For something to function as money it needs specific properties. A good monetary system reduces friction in the economy. Sort the properties below into the correct category.
This is a crucial distinction that most people miss. Money is the measuring tool — wealth is the actual real stuff.
Money allows us to "speak the same economic language" — millions of people can trade with each other without individually agreeing on the value of every single thing.
Say you run a small online shop selling T-shirts. Your customers don't pay you in shoes, work hours, or grain — they pay in money. Why? Because money lets both sides of every transaction skip the negotiation.
💡 How does this connect to crypto?
Cryptocurrency attempts to fulfill the same functions as money — but in a decentralised, digital way. To evaluate whether Bitcoin, stablecoins, or gold are good money, we need to measure them against these exact properties. That's what you'll explore next.