What Is Sound Money?

A Look to the Past

Since the dawn of mankind goods was traded among people for other goods, this was known as battering. So imagine if I was a fisherman and I was sick of eating fish all day, I see this new fruit called apples and I want to get one. Luckily I find someone willing to trade their apple with me, I say I am going to give you one fish in exchange for an apple, he gives me the apple and I give him the fish so everyone is happy. This system of trade seems okay but what if no one who had apples wanted fishes, this is where all the problem lied. For one person to barter with another person both had to be in agreement with the things they wanted and if both consenting parties were not in agreement the trade would not occur. This problem was fixed with the introduction of money like gold, silver, platinum, etc... Precious metals like gold and silver were specifically chosen due to their divisibility property(they are able to be cut so that the price decreases), durable, cannot be inflated(cannot come out of thin air), the "cannot be inflated" part is very important because what sets metals that act as money apart from fiat money(the type of money we have now) is this. So why is inflation a bad thing in regards to money, well the simple answer is rarity drives up value and prices. If we have an abundance of one thing lets say air we think of it as being less valuable since there is an abundance of it, the same goes with money we don't want to put our money in the bank and later withdraw that money and come to release the money that could buy a house in the past can now only buy a cup of coffee.

Types of Money

Fiat:

Benefits:

1. Easily trade able. Gold, silver, and other metals are dense and weigh too much to carry around all the time

Yeap, this is it this is the only real benefit I could see with using fiat currencies.

Negatives

1. Easily inflated by central powers (printing of money)
2. Reliance on central power to do the right thing
3. Political influence, money that is centrally controlled is are usually subdued to the wimps of who is in power. Ex: The Venezuelan government, The Zimbabwean government, etc...

Gold and other precious metals

Benfits:

1. There can only be a certain amount of gold in circulation (scarcity = higher prices)
2. Harder to counterfeit
3. Gold specifically cannot rust
4. Gold can be used for other things other than money. Ex: Satellites, Jewelry, Computers, etc...
5. Durable
6. Forge-able.
7. Divisible

Negatives

1. Hard to trade with since most metals are dense

This single problem puts gold at a heavy disadvantage. In this technology-driven era, the ability to move value around is very important. Though some of these problems could be fixed with middlemen such as banks you run into the problem of not only the cost but also trust.

While all these forms of money/currencies have their strengths all of them, however, fall short when it comes to decentralization. Many disregard this aspect when it comes to money yet it is very important, especially if you live in a country that like China, Venezuela, Russia, and many other countries that are very adamant about the choice of people to do what they want. Here is where cryptocurrencies come in, with this relatively new technology you could exchange value from one person, business, group to another, it is basically impossible to completely shut down the network and it is difficult for a government to know who is doing what on the network since the only data that is being broadcasted only has to do with the network itself. Cryptocurrencies also have the properties of sound money, they are divisible, scarcity, counterfeit-proof, store of value, etc... but unlike gold, it is easy to transfer that value across the world, Throughout the world cryptocurrencies are being used and in areas like Venezuela cryptocurrencies are especially relied upon.

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