Money

Understanding how money fits into the economic model for contributionism

Money is used to facilitate exchange by acting as a common medium and unit of account. Money also serves as a store of value, enabling people to save and transfer wealth over time. Contributionism can be adopted in many different economies that each could be using multiple forms of money. Contributionism could also be adopted in economies that don't even use money.

Gold

Gold is a precious metal that has been used as a store of value and a medium of exchange for thousands of years.

History of usage

Gold has been used as money since ancient times, with the earliest known gold coins dating back to around 600 BCE in Lydia (modern-day Turkey).

Current usage

Today, gold is primarily used as a hedge against inflation and economic uncertainty. It is often bought and held as an investment and a reserve asset by central banks and individuals rather than as a direct medium of exchange in everyday transactions.

Problems

Although gold remains a popular store of value, it faces challenges such as storage and transportation issues, lack of liquidity compared to other forms of money and no yield in terms of interest. Its popularity can fluctuate based on market perceptions of stability and economic forecasts.

Fiat currencies

Fiat currencies are government issued currencies that are not backed by a physical commodity but rather derive their value from the trust and authority of the issuing government.

History of usage

Fiat currencies became the predominant form of money in the 20th century, particularly after the Bretton Woods system ended in 1971, when the U.S. dollar ceased to be convertible into gold.

Current usage

Fiat currencies are the most widely used form of money today, facilitating everyday transactions, trade and investments globally. They serve as both a medium of exchange and a unit of account, and their supply is typically managed through monetary policy by central banks.

Problems

Fiat currencies can be subject to inflation and hyperinflation if mismanaged. They rely heavily on government and policy stability. While universally accepted, concerns over centralisation, monetary policy impacts and national debts can affect their popularity.

Cryptocurrencies

Cryptocurrencies are digital or virtual currencies that use cryptography for security and operate on decentralised networks, usually based on blockchain and distributed ledger technology.

History of usage

The first and most well-known cryptocurrency, Bitcoin, was introduced in 2009. Since then, thousands of different cryptocurrencies have been developed.

Current usage

Cryptocurrencies are used for a variety of purposes including investments, transferring value across borders and financial services like lending and borrowing in decentralised finance (DeFi). Some are used for direct purchases, often where traditional payment methods may not be available.

Problems

Cryptocurrencies face issues such as price volatility, regulatory uncertainty and scalability challenges. Security concerns, environmental impacts of mining and lack of widespread acceptance for everyday transactions can hinder their growth. Cryptocurrencies remain popular for their potential high returns, decentralisation features and innovation in financial services.