Human civilization flourished in times and places where sound money was widely adopted, while unsound money all too frequently coincided with civilizational decline and societal collapse — Saifedean Ammous.
Economic value is the benefit provided by a product or service.
It is subjective and circumstantial because it depends on each subject's appreciation for a particular service in a determined situation.
Money is the tool that socially (1) represents, (2) stores, (3) transfers, and (4) measures economic value.
Those functions are ordered by its relevance, which coincides with the chronological order of the stages through which money naturally evolves.
Money emerges spontaneously through voluntary adoption. The pseudo-money that is imposed by force is called Fiat Money, it may be also called Political Money or Fiat Money.
The characteristics that provide a good with the ability to fulfill those functions with security are called monetary properties. A secure money scales social coordination.
1st Stage: Collectible.
Function: Display of economic value.
-verifiable scarcity: certainty that IS scarce. Verifiability implies representation capacity. Scarcity implies cost / difficulty / work / effort / merit to get it.
2nd Stage: Store of Value and Medium of Wealth Transfer.
Additional function: Preservation of economic value/Transportation of economic value across time.
Additional monetary properties:
- predictable low inflation: certainty that STAYS scarce if it is even more appreciated. It provides security against economic value dilution caused by an increase of units.
- storability: security against theft, loss or non-durability.
- portability: security against transfer costs (inversely proportional to the value-to-weight ratio).
3rd Stage: Medium of Exchange.
Additional function: Transportation of economic value between people.
Additional monetary properties:
- fungibility & divisibility: it simplifies the exchange process.
Fungibility provides security against the margination of specific monetary units, which enhances its store of value capacity. It also provides privacy for current and past owners, which implies protection and censorship resistance.
- saleability: security against lack of social adoption.
4th Stage: Standard of Value.
Additional function: Unit of account: it measures economic value. This implies the existence of a price system that facilitates economic (value) calculation.
Additional monetary property:
- relatively smooth distribution: security against abrupt changes in value due to a relatively high concentration of it.
Scarce: As an absolute concept, it implies that something it is not available in limitless supply. It usually refers to the relative availability of it.
Verifiable scarcity: its scarcity is irremediable / unforgeable / recognizable / identifiable.
Fungibility: ability for different instances of a good to be treated as equivalent in the market, with no regard to who produced them.
Hard money: money in which issuing any new unit of it is very expensive.
Sound money: money which quantity can not be inflated at a high rate.
Medium of exchange: the asset that settles a transaction. "What" a transaction is denominated in. E.g. USD.
Means of payment: the method used to implement a transaction. "How" a transaction is manifested. E.g. credit card payments.
Currency: a generally accepted medium of exchange.