The three essential functions of currency

Currency as an account unit

The currency fulfills the unit unit function by measuring the value of goods and services in an economy . It is used to express the value of all goods to a common extent, which simplifies exchanges . For example, thanks to currency , we can compare the value of one property with that of another, which is impossible in a barter economy where one must exchange a good against another directly.

Currency as an intermediary of exchanges

Before the appearance of money , exchanges rested on barter , a system that suffered from the double coincidence of desires: each part should want what the other had. Currency has become an intermediary of exchanges , a means of payment accepted by all, which facilitates exchanges and avoids the return to barter . This currency function is fundamental to fluidifying transactions in a market economy .

Currency as a reserve of value

Finally, the currency fulfills the value reserve function , that is to say that it retains a value over time . Unlike barter , where you have to exchange immediately, money allows you to spare and postpone payments until later. This value reserve is essential for economic stability and confidence in the monetary system.

History of the use of money and evolution of forms

The transition from the barter economy to the goods currency

To overcome barter constraints, certain goods such as salt, livestock or shells have been used as a currency . This merchandise currency was accepted by all, because it had a recognized value and made it possible to facilitate exchanges .

The appearance of coins and metal currency

Over time, the precious metal coins ( gold, silver) appeared. These parts and tickets represented a major advance: each price struck had a guaranteed value by the quantity of metal it contained. This form of currency has standardized transactions , simplifying the exchanges of goods and expanding large -scale trade.

Fiduciary currency: confidence and regulation

Subsequently, the fiduciary currency imposed itself. These are parts and tickets whose value no longer depends on the precious metal, but on the confidence of the users of the currency and the guarantee of the states. This development has made it possible to create money in larger quantities, facilitating economic development. However, is not a currency everything that circulates: only the currency recognized by the State or a central institution has legal course.
The end of the gold stallion in the 20th century marked the decorrelation between the value of the currency and the precious metal . now a tool for economic policy, based on the confidence and regulation of central banks . The euro, for example, is a single currency shared by several European countries, which facilitates exchanges and strengthens the stability of the European currency .

Monetary, inflation and monetary policy

Central banks control the creation of fiduciary currency and the amount of money in circulation thanks to their monetary policy . An excessive emission of money can lead to inflation , that is to say a generalized price increase and a loss of purchasing power. This affects the capacity of the currency to fulfill its reserve function of value: if the currency does not keep its value, the confidence of economic agents crumbles. To protect themselves, some investors turn to bonds or other assets.

The digitization of currency and scriptural currency

With the development of technologies, the scriptural currency has become preponderant. This form of money is based on electronic entries in bank , representing the majority of the currency in circulation . It allows you to make payments and transactions without physically handling the parts and the tickets . Today, each national or regional currency can exist in scriptural form, facilitating the management and speed of exchanges on a global scale.
Thus, currency has evolved, going from a simple property serving as a currency to a complex system, central to economic life, whose stability and confidence are essential for the users of money and economies .

The interest of cryptocurrencies in the face of the limits of traditional forms of money

Cryptocurrencies as a new form of money

Cryptocurrencies are electronic currencies , blockchain technology . They fulfill the different functions of money :

• Unit of account : Cryptocurrencies make it possible to measure the value of goods and services in their own system.
• Intermediary of exchanges : They facilitate transactions between users without going through banking intermediaries.
• Reserve of value : Some cryptocurrencies, such as Bitcoin, have a limited quantity, which protects against inflation linked to excessive monetary printing.

The needs to which cryptocurrencies meet

Faced with the limits of fiduciary currency and the loss of confidence linked to inflation, cryptocurrencies offer:

• A decentralized alternative to the common currency controlled by the States.
• Protection against devaluation due to the excessive creation of money .
• Increased transparency and safety in transactions .
• A means of payment accessible worldwide without barriers.

Invest in cryptocurrency: our recommendation for beginners

For European users who wish to enter the world of cryptocurrencies and start investing we recommend the Bitvavo platform:

• Very competitive costs (maximum 0.25 % on the platform for beginners and even 0.05 % max on USDC pairs of the Pro Platform).
• Very rare applied spreats and explicitly mentioned if necessary, including on the beginner interface while many platforms invoice fees not mentioned high.
• Over 350 cryptocurrencies available.
• An environment regulated and registered with European financial authorities.
• A simplified interface for beginners.
• The possibility of making free deposits in euros by bank transfer or SEPA.
• Excellent security with partial insurance on funds in the event of a problem.