What Money Has To Be

Money vs. Currency?

Some people use the term currency as a reasonable approach to solving the medium-of-exchange problem, while excusing it from a store-of-value role. Similarly, the same people use the term money when talking about gold — where the store-of-value role is primary — and likewise excuse its limitations as a medium of exchange. This duality has been normalized, perhaps because there has never been a single thing that could perfectly occupy both roles simultaneously.

The idea of two things "built for purpose" vs. a single thing doing both is, on the surface, a convincing one — the rule of thumb works in most scenarios. My mountain bike is best for climbing rugged terrain; my racing bike is better on flat roads. The rule breaks, however, when it comes to money.

The three functions are not independent layers. A medium of exchange that points at a decaying store of value inherits that decay: Gresham's Law, resurrected — holders spend the weak money first and keep the strong. A unit of account tethered to an unstable denominator is no unit of account at all; it is a measuring stick that keeps shrinking. And a store of value that cannot move across space is impractical for trade. Every attempt to isolate one function collapses the others.

Until Bitcoin, an ideal money had never existed.

Additively stronger than the sum of its parts

These three functions are not a menu. They are one thing expressed through three faces — and until Bitcoin, no money had ever simultaneously satisfied all three. Gold came closest on time but stumbled on space. Fiat extended across space but forfeits time. Stablecoins isolate movement but borrow decay from the denominator beneath them.

Bitcoin holds all three in structural resonance for the first time in monetary history. Not a better version of what came before. A different category of thing altogether — not just the first money, but thereby also the last.