Types of money

The idea that anything can be money if we all just believe hard enough in it, has been very popular among some regimes and politicians. Yes, of course, anything can be used as money, just like anything can be used as toilet paper, but choices have consequences. — Saifedean Ammous. 

Free market money

Its adoption is voluntary. E.g.: seashells, Rai Stonesgold or bitcoin.

Fiat money

The word "Fiat" originates in Latin, meaning decree, mandate, order.

Fiat money (e.g. $ or €), also called Political Money or State Money, is any currency exclusively issued and priviliged by the state, which establishes decrees like: 

-Anti-counterfeit decree, which grant the Central Bank the monopoly of printing money. 

-Legal tender decree, which recognize a currency to be valid for extinguishing any debt when offered ("tendered"), even if it is against the will of the receiver. Its acceptance is imposed.

Legal tender status also implies that it is used and required as payment by official entities, and works as its Unit of Account. All of it incentivizes its adoption and smooths its distribution. 

-Anti-money laundering decree, which establish restrictions to the use of money that is not controlled by a exclusive group of commercial banks that keep personal information about the money owners and its source.

-Mandatory exchange decree, which forces the exchange of the main form of money to the fiat currency, like for example gold for $ in 1933. It harms the distribution of the competitor money while benefiting that of the imposed one. 

Image: fiat money from the Yuan Dynasty