Word of the Day | Sound Money

To understand the expression “Sound Money” one needs to understand the difference between Currency and Money.

Money should be a medium of exchange, a unit of account, portable, durable, divisible, recognisable, fungible and have store of value.

• Medium of exchange - you can change it for something else

• Unit of account - it could be a number or it could be an amount

• Portable - it is easy to carry around

• Durable - it last a long time without being degraded

• Divisible - it is easily broken into smaller units without losing value

• Recognisable - it is easy to identify and hard to fake

• Fungible - it is interchangable, i.e. one unit of is exactly the same as any other unit

• Store of value - it can be stored over a long period of time and has limited supply

Currency (USD, EUR, GBP..) is a…

• Medium of exchange

• Unit of account

• Portable

• Durable (somewhat)

• Divisible

• Fungible

Currency does not have Store of Value as it can be printed and has unlimited supply.

versus Money that is a…

• Medium of exchange

• Unit of account

• Portable

• Durable

• Divisible

• Fungible

and…

• has a Store of Value over a long period of time, and has a limited supply.

So, when you hear "Sound Money," think of a form of Money that has all these qualities: Medium of exchange, Unit of account, Portable, Durable, Divisible, Fungible and has a Store of Value.

Gold and Silver is Sound Money - can you name anything else that is Sound Money?

Find out more about the difference between Currency (EUR, USD, GBP etc.) and Money -  Click here to find out.

https://www.dbm.academy/faq for more blockchain vocabulary.