What are the properties of money?
Money can be most useful by having some properties. Like it should be fungible, durable, portable, recognizable, and stable. These features bring down the processing cost of using money as they make it easy to exchange.
Money should be fungible
Fungible is a term used to refer to the quality which allows the exchange of one thing for another for the same value.
So units of money should be exchangeable with one another. If non-fungible goods are used as money it gives rise to processing cost that includes testing each unit of the goods before an exchange procedure.
Money should be durable
Money should be resistant enough to maintain its utility for many years to come as an exchange value. Attempting to use non-durable goods as money hampers the very idea of money’s very basic future intended use and values.
Money should be portable
Another important feature of money is that it should be easy to carry and divide so that a person can carry or can be transported easily.
If a good used as money is not easily transportable can give rise to the transaction cost.
Money should be recognizable
Genuineness and the total sum of the goods used should be easily visible to the users so that they can get ready for the terms of an exchange.
Like others, using a non-recognizable good as money can give the need for transaction cost in relation to validating the goods and getting ready for the amount required for an exchange
Money’s supply should be stable
The supply of goods utilized as money should be proportionately constant over time to stop swaying the value of the goods.
Utilizing a non-stable good as money gives rise to transaction costs because of the risk that its value may increase or decrease due to the abundance or scarcity of the goods before the next transaction.
Hard money and Soft money- how they are different?
Hard money is referred to money that is related to some valuable commodity such as gold or silver.
As the supply of these metals is not much, this legal tender is less prone to inflation as compared to printed banknotes which are known as soft money.
Soft money may be considered risky by some as there is no surety if that extra note will not be printed.
What are cryptocurrencies/ is cryptocurrency money?
In the recent past, digital currencies also known as cryptocurrencies have come into play. Bitcoin is one such currency.
There is no bank transaction, maintaining records, or payment system involved. These virtual currencies do not involve any issuance from the government or other central authority.
Cryptocurrency incorporates some of the features of money and is often utilized for online transactions. Many governments think that they are taxable assets but others think that they can not be given legal status as other foreign currencies.
However, these currencies are not used on an everyday basis, they have got some usage as a notional investment or a store of value.
Some countries have acknowledged cryptocurrencies as a medium of transaction El Salvador is one of them.
