Origins of Money
On the last post we took a look at the beginnings of money:
- How did people trade without currency?
- What qualities did (and does) money have to make it so useful?
Now, we're going to explore why money is valuable and why crypto can become mainstream money.
The value of money
There are 2 simple ways for a currency to gain value:
Be backed
When a currency is backed by something, it means you can easily exchange it for that something at a fixed rate.
If a currency is backed by water, food or medicine it would have innate value, because it could be exchanged for stuff essential to human life.
For a long time, the US dollar was backed by gold, which, although not vital to humans, was commonly agreed to have some innate value.
Trust
As you might have spotted with the gold-backed dollar, it didn't really matter if gold was really important to human life, what mattered was that people said it had value and, therefore, it had!
If a majority of people agree that a currency is worth something, then it will actually be!
For example, take Ethereum, if sellers start accepting ETH as a method of payment and buyers start paying with that currency, then having ETH will, at some point, be equal to having those products!
Conclusion
In the modern world, money itself is not powerful or worth anything. The fact that having many Euros, Dollars, Yens, BTC, STEEM and even DOGE is equal to being wealthy and well-off is because we all agree that those are valuable!
Thanks for reading!
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