Money matters to a person for everything in life, and it matters to the government to streamline the economy. However, people view money from different angles:
- Some people require money to fulfil their basic needs;
- Some require money to realize their dreams of luxurious living;
- Some require money to create massive wealth to maintain a high status in society.
Types of money and their functions
Money is a broad term and matters differently for the government that has to run the entire country. A government measures money in terms of its GDP growth that sets the country’s economy on the track. Money is defined as a generally accepted medium of exchange for goods and services in economies. However, money has three primary functions:
- The medium of exchange for products and services
- Unit of account
- Store of value
These functions have been continuously performed successfully throughout history with different types of money. Practically, anything that has purchasing power and value is considered money, but it is not true in technical terms. Most relevant components of money are:
Commodity money: it is the simplest and oldest form of money that acts as a medium of exchange, store of value, and unit of account. Commodity money originates from the barter system, where goods and services are directly exchanged for other products and services. Currency is not genuinely involved in the transaction as the commodity plays a role in the transaction process. The commodity itself acts as money, and its intrinsic value is the value of money.
Fiat money: Fiat currencies such as coins and bills are the highest conventional currencies in the modern economies that are minted and printed under the government’s jurisdiction. Unlike commodity money, fiat money is not backed by any physical commodity. By definition, its intrinsic value is significantly lower than its face value. Hence, the value of fiat money is derived from the relationship between supply and demand. Most modern economies are based on a fiat money system. Examples of fiat money include coins and bills.
Fiduciary money: Unlike fiat money, it is not declared legal tender by the government, and people and entities are not legally required to accept it adds a means of payment. Instead, fiduciary money is trusted money, where the issuer promises to exchange it back for fiat money or commodity when requested by the bearer. Fiduciary money carries a risk of breach of trust; else, fiduciary money cheques, banknotes, or drafts are as good as regular fiat money.
Commercial bank money: It represents the portion of a currency that is made of debt generated by commercial banks. It can be described as claims against financial institutions that can be exchanged for real money or to buy goods and services. Commercial bank money is significantly created through fractional reserve banking, a process where commercial banks give out loans worth more than the value of the actual currency they hold.
Invest in innovative money – Bitcoin
The money regime is never going to end. Every money structure created in the past holds good today, regardless of its prevalence in the standard practice. However, new forms of money will continue to add. Cryptocurrency is the mod money of the contemporary world that is also viewed as the future of all other monies created so far. Bitcoin, the first established cryptocurrency holds dominance as a mod digital currency. Many people may not be conversant with the modus operandi of bitcoin, but it is genuinely a lucrative avenue for investors for adding to their investment portfolios. The opportunity is open on platforms like bitcoin profit. How can someone make the best use of Bitcoin? It is the right time to leave aside other types of money and to focus on innovative crypto money. It’s time to focus on the growth of Bitcoin for a bright future.
Bitcoin is your obstacle-free road to financial freedom. One can make a secure investment for significant returns by making a journey on this road. Indeed, now is the right time to lay your foundation into growing your cryptocurrency portfolio. You just need to explore the opportunities on a reliable platform, invest, and to stay back for high returns.