this post was submitted on 20 May 2024
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That is not true, for the vast majority of the history of money it was based on a commodity that was valuable in its own sense. It is only in the last century that we have begun experimenting with currencies that are not pegged to the value of a commodity.
Cryptocurrencies derived their value from being a network of users (metcalfe's law) so they are more like a commodity money. Thing about something like Meta, which has a valuation in the trillions despite its physical assets not be worth nearly that and its functionality as a website being easily replicated on an alternative platform. The users are what is valuable.
True, but using grain or tools as a currency would make the modern financial system pretty much impossible. Even for simple banking, you need something small and light like gold or currency notes.
What if it was so small and light it was only electrons? And what if it accrues its value from the energy expended to create it? Maybe using some sort of cypher to ensure anyone could verify it? Idk maybe we're onto something..
then again it still syphons value to the top so maybe not...
You mean, like how it is now?
You want more climate change? Also, value comes only from what someone else is willing to exchange for it.
Why should anyone else be able to know anything about a transaction between A and B?
Gold is a commodity and you can create a currency that is backed by a commodity so you aren't actually trading the commodity itself.
Yes, gold is a commodity, but when used as currency it is acting as a medium of exchange and not as a commodity. Same with pieces of paper with the sign of the reserve bank governor, or data on a computer's memory. The gold, paper and hard disc all have intrinsic value, but when used as currency they are assigned an arbitrarily higher face value.
When you have commodity money, the value of the money is derived from the value of the commodity. You don't get to assign arbitrarily higher values to the money because the market determines the value. But yes, all speculative assets typically have a higher extrinsic value compared with their intrinsic value but I don't believe that has anything to do with it being a medium of exchange or not. That is just supply and demand.
The value of the commodity acts as a floor, but the face value is dictated by supply and demand, and demand usually exceeds supply, driving it significantly above the floor. Take gold, for example. Gold's intrinsic values are (1) it's pretty and can be used to make decorative items, and (2) it has some applications in electronics. It can't be eaten, can't be worn, and it's too soft even to make tools out of it. Yet, its extrinsic value is huge, because it is publically seen as a good medium of exchange and so a lot of people want it.