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: benefit provided by a product or service. It is subjective because it depends on each subject's appreciation for a particular good in a determined situation.
The tool that (1) represents, (2) stores, (3) exchanges, and (4) measures economic value is called money.
It allows for social coordination.
Historically, money has evolved as stages that coincide with its functions:
Social representation of value: it displays economic value.
2nd. Store of Value. Medium of Wealth Transfer.
Preservation of economic value/Transportation of economic value across time.
3rd. Medium of Exchange.
Transportation of economic value across space (between people/merchants).
4th. Standard of Value.
Unit of account: it measures economic value. This implies the existence of a price system that facilitates economic (value) calculation.
Monetary properties are the characteristics that provide the ability to fulfill those functions with security:
1. - verifiable scarcity: certainty that IS scarce. Verifiability implies representation capacity. Scarcity implies cost / difficulty / work / effort / merit to get it.
2. Easily verifiable scarcity and:
- predictable low inflation (inelastic supply): certainty that STAYS scarce if demand continues. 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).
3. Store of Value and Medium of Wealth Transfer monetary properties and:
- 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.
4. Medium of Exchange monetary properties and:
- relatively smooth distribution: security against abrupt changes in value due to a relatively high concentration of it.
Trusted third parties are security holes, so any other feature that reduces dependency on intermediaries is also a monetary property.
A secure money allows for social scalability: the efficiency in social coordination.
Social scalability drives civilization advancement.
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.
Money is the vehicle that transports value through time and distance.
It makes possible the coordination between people.
It is secure when it is scarce, easily verifiable, sound, able to be stored and transported, divisible, fungible, widely accepted and distributed.