Mastering ‘money’ is the key to life’s success and something we can all learn. The same can be said for cryptos, and this is probably even more important as we trailblaze into an unstoppable financial future. To understand crypto, you need to understand money and what it actually is; without this understanding, it will be impossible to comprehend how crypto is going to change the world, and how to capitalise on it at the right time.
What is money?
Money can be classified by the following three traits:
1. It’s a unit of measure – this means you can accurately gauge how much something is worth
2. It’s a medium of exchange – this means you can efficiently transact with somebody else without having to barter your own goods/assets for other goods/assets (which can be extremely inefficient!)
3. It’s a store of wealth – the most important factor of all. ‘Money’ acts as a store of wealth over long periods of time. There are no exceptions to this rule.
There are other traits that money has:
4. It’s fungible – we all need to agree that the money we have is the same as it is somewhere else, so it has to be recognised and comprehended by people all over the world.
5. It’s divisible – meaning it can be broken down into smaller units of exchange to buy smaller things.
6. It’s durable – this means it has to be able to withstand volatility and harsh environments, such as climate, temperature and transportation (hence why food can never be money).
7. It’s portable – you can transport large amounts of it to wherever you need it to be.
Most importantly, as mentioned earlier, money has to have a store of wealth and this is why fiat currencies like GBP, and cryptocurrencies (for now) can never be money. Currency will never be a store of wealth because it is too fragile compared to bullion (gold and silver) and it doesn’t last too long. How many times have you received a ripped bank note?!
Currency tends to be in low denominations and notes too, for simplicity and efficiency. Gold and silver may not be practical for every day use, but they have been used to back currencies for centuries. Another major issue with currency is that it is centralised, meaning any government can easily devalue it by printing more, or worse still, if a country is over-thrown its’ currency can disappear as legal tender.
To summarise, currency is everything that money is, except for the fact it cannot be a store of wealth over long time periods. Only gold and silver can be money, nothing else. Even in today’s world, with ever increasing technologies, the only thing proven to be a store of wealth regardless of what happens in the world, is gold and silver. That’s not to say crypto won’t be a long-term store of wealth in the future, but we are likely many generations away from that happening.
Why isn’t crypto money if I HODL long-term and it grows in value?
Not wanting to repeat the point, but as it stands, all crypto assets cannot, and do not, act as a store of wealth. This can be seen across the thousands of crypto Telegram groups around the world; ultimately, everyone has a desire to trade their crypto back to fiat, and in turn, invest it into ‘money’ or other valuable assets such as land. It seems for the time being that nobody sees crypto as being the best place to store wealth, simply because it isn’t possible right now. In times of disaster, only gold and silver will be accepted as money. Imagine if you had no access to a laptop or the internet, you could be a crypto billionaire and unable to use it!
With all this said, the evolution of crypto is happening at such a pace, we simply can’t comprehend where it’s going. With bitcoin now having its’ own exchange traded funds (ETFs) and with the advent of decentralised finance (DeFi) and now even SmartDeFi, the world of crypto is really hotting-up. Who knows, maybe it will melt the bullion one day and become the world’s leading store of wealth.