In a previous blog post, we explored the concept of a 'Store of Value.' Now, let's differentiate it from Money. While a store of value only needs to maintain value over time, money encompasses three functions: being a medium of exchange, a unit of account, and a store of value. Money facilitates trade and economic activity by providing a common measure for valuing goods and services and a medium through which transactions can occur. While both need to be durable and stable, money must also be highly liquid, easily transportable, and divisible to facilitate transactions.

Money is a good that people use to trade for other goods because it is more easily sold (saleable) than other goods. This saleability across different scales, locations, and times is what makes a good suitable to be used as money. The functions of money are:

1. Medium of Exchange: Money facilitates trade by acting as an intermediary that people acquire not for its own sake but to trade it for other goods and services.
2. Unit of Account: Money provides a common measure for valuing goods and services, making it easier to compare prices and value.
3. Store of Value: Money allows individuals to transfer purchasing power over time, preserving value for future use.

Historically, money has evolved from barter systems to commodity money (such as gold and silver) and eventually to fiat money issued by governments. Gold became widely adopted as money due to its superior properties: durability, portability, divisibility, fungibility, and scarcity.

A good form of money is also a good store of value. Historically, gold has been both an effective store of value and used as money.

In modern economies, fiat currencies like the Canadian dollar serve as money, but their effectiveness as a store of value is very very poor due to inflation of the money supply by Central Banks/Governments. In contrast, assets like gold and Bitcoin are primarily seen as stores of value, though Bitcoin is increasingly used as money in some contexts.

Money is more than just a medium of exchange or a store of value; money is an abstraction that represents the time and effort we invest in our work. When we earn money, we are essentially converting our labor, skills, and productivity into a form that can be saved, spent, or invested. This perspective highlights the importance of preserving the value of money over time, as it directly correlates to the preservation of our hard work and sacrifices. When money maintains its value, it ensures that the hours we’ve worked and the energy we’ve expended remain meaningful, allowing us to secure our future, achieve our goals, and improve our quality of life. Therefore, choosing a sound form of money that resists inflation and retains purchasing power is crucial for safeguarding the fruits of our labor.

Bitcoin is a new form of digital gold, combining the best attributes of gold with the advantages of digital technology. Bitcoin’s fixed supply of 21 million coins ensures, for the first time ever, absolute scarcity, while its decentralized nature and cryptographic security provide durability and resistance to censorship. Bitcoin is superior to both gold and fiat money in terms of portability and divisibility, making it a more effective form of money for the modern digital economy.

Money is indeed an abstraction, serving as a representation of value, a unit of account, and a medium of exchange. This abstraction is fundamental to its role in facilitating economic activity, simplifying trade, and preserving wealth. By understanding money as an abstraction, we can better appreciate its functions and importance in shaping our lives and families in the City of Kingston.

Understanding the nature of money and its functions is essential for appreciating its role in our lives. By choosing sound money like Bitcoin, which offers stability, security, and efficiency, we can better preserve our hard work and ensure a prosperous future for our children and the greater Kingston community. In navigating the complexities of the modern economy, Bitcoin stands out as the global solution to the limitations of fiat currency systems, embodying the culmination of money's evolution.

Please read Saifedean Ammous' "The Bitcoin Standard"