Topic: What is a currency ? (Read 319 times)
Currency is a medium of exchange which is use to facilitate transactions. Currency also serves as a store of value and it is not only today's papers currency that should be consider as currency but gold , stocks and other commodities can be term as currency too.
The definition of currency varies from country to country, and also on the era (the definition of currency in 1920 is different to what it is now). And, if you look at a 'traditional' definition of currency, bitcoin and altcoins do not satisfy all requirements
The definition doesn't vary, it's a system of money which has different values when exchanged from country to country, except for cryptocurrency that are not tied to any country.
When you say: "bitcoin and altcoins do not satisfy all requirements"
They are decentralised, which differs them from traditional money but still denominated as currency
Currency is a generally accepted form of money, including coins and paper notes, which is issued by a government and circulated within an economy. Used as a medium of exchange for goods and services, currency is the basis for trade. However, some currencies, including cryptocurrencies such as Bitcoin and Litecoin, and other online currencies and branded currencies are not tied to any country.
The definition of currency varies from country to country, and also on the era (the definition of currency in 1920 is different to what it is now). And, if you look at a 'traditional' definition of currency, bitcoin and altcoins do not satisfy all requirements
what are some examples of other currencies from other countries you mean, that doesn't fit what's in the op?
The definition of currency varies from country to country, and also on the era (the definition of currency in 1920 is different to what it is now). And, if you look at a 'traditional' definition of currency, bitcoin and altcoins do not satisfy all requirements
They do not, but as you mentioned, history verifies that. New definitions are made, new technological revolutions are made like with bitcoin.Money as we know it change with bitcoin on the scene.
The definition of currency varies from country to country, and also on the era (the definition of currency in 1920 is different to what it is now). And, if you look at a 'traditional' definition of currency, bitcoin and altcoins do not satisfy all requirements
Currency has a whole lot of definition and it's varies in terms of countries, uses and looks. Well the most important currency to me as a cryptocurrency enthusiast is tech currency. This has a good advantages over traditional currency
For something to be defined as a currency, it need to meet the following criteria:
1. Fungibility
For a currency to be fungible, its units has to be completely identical and interchangeable. For example, if you swap one US dollar for another, they are worth exactly the same amount of money.
The same applies to Bitcoin as an example, making it a fungible currency.
2. Shortage
For something to be considered a currency, is necessary a limited supply of it. Otherwise it would have no value.
Using gold as an example: If the amount of gold is limited ( and it is). There is a finite amount in the world, which gives it a value as a currency. Something similar happens with Bitcoin, only 21 million of them will ever be released, which gives Bitcoin its value. If anything, fiat currencies like the US dollar have the weakest amount of scarcity, because central banks can simply print more money when they see fit.
3. Durability
Because gold can withstand harsh weather conditions and there is no natural wear, we can rely on it to outlive us, which gives it its value. If we could not ensure whether our gold would still be around tomorrow, it wouldn’t have any value as a currency.
Cryptocurrencies are arguably the most durable currency of all. As long as the network they exist on survives, they’ll retain 100% of their value.
Given that the networks cryptocurrencies are stored on are decentralised, it would be almost impossible to destroy them, meaning their durability is essentially guaranteed.
4. Transferability
The purpose of a currency is to enable trade between people and the transfer of wealth from one entity to another.
5. Divisibility
Finally, a currency needs to be able to be broken down into smaller fractions or units.
One of the main reasons humanity moved away from trade and onto currencies is because it’s impossible to trade half a animal (especially if you want it to live!). However, if you only want half a dollar’s worth of something, you can just pay 50 cents for it. This is called divisibility. Cryptocurrencies are divisible too.
1. Fungibility
For a currency to be fungible, its units has to be completely identical and interchangeable. For example, if you swap one US dollar for another, they are worth exactly the same amount of money.
The same applies to Bitcoin as an example, making it a fungible currency.
2. Shortage
For something to be considered a currency, is necessary a limited supply of it. Otherwise it would have no value.
Using gold as an example: If the amount of gold is limited ( and it is). There is a finite amount in the world, which gives it a value as a currency. Something similar happens with Bitcoin, only 21 million of them will ever be released, which gives Bitcoin its value. If anything, fiat currencies like the US dollar have the weakest amount of scarcity, because central banks can simply print more money when they see fit.
3. Durability
Because gold can withstand harsh weather conditions and there is no natural wear, we can rely on it to outlive us, which gives it its value. If we could not ensure whether our gold would still be around tomorrow, it wouldn’t have any value as a currency.
Cryptocurrencies are arguably the most durable currency of all. As long as the network they exist on survives, they’ll retain 100% of their value.
Given that the networks cryptocurrencies are stored on are decentralised, it would be almost impossible to destroy them, meaning their durability is essentially guaranteed.
4. Transferability
The purpose of a currency is to enable trade between people and the transfer of wealth from one entity to another.
5. Divisibility
Finally, a currency needs to be able to be broken down into smaller fractions or units.
One of the main reasons humanity moved away from trade and onto currencies is because it’s impossible to trade half a animal (especially if you want it to live!). However, if you only want half a dollar’s worth of something, you can just pay 50 cents for it. This is called divisibility. Cryptocurrencies are divisible too.
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