The foundations of “Money”

Throughout this Foundations of “Money” series, I like to envision these ‘complex’ ideas with made up scenarios. I feel like it helps to simplify the complexity and really helps hone in to the actual meaning of what is trying to be described.

Durability

In this situation, you love cotton candy, and you’ve been lucky enough to find a wonderful job that pays you with it! All is well in the world.
One day, after you’ve been paid with your copious amount of cotton candy, on your way to your car, it starts raining… Now I’m sure we’ve all seen the memes or videos of some unsuspecting child enjoying their life to it’s fullest when a loving family member tells them to dip it in the cup of water.

This isn’t very durable. Here, you can quickly see and understand why Cotton Candy (as well as many other things) can’t be used as “Money”. It needs to last and survive through the unexpected.

The U.S. Dollar, for example, is made up, not only of paper, but a combination of cotton and linen as well. This unique combination helps to keep it durable, and last the wear and tear of time, as well as adding some (but not complete) protection against fire.

Not only does it need to be durable to weather, but also daily use. It’s folded into wallets, origami triangles, rolled and banded together, crumbled, smashed, and just generally abused. Everyone can tell the difference between a fresh new bill from the bank, and one that’s been around the block, but they’re both accepted regardless of their condition (this is known as ‘Uniformity’ and covered in the “Divisibility and Uniformity” section of the foundations of “Money” series).

Portability

Rocks. In this scenario we’re talking about rocks (or ‘minerals’ I guess…)

You’ve worked hard, you’ve saved up all of your…. minerals, for years! And now you feel like it’s time to finally settle down and buy a house. (In each of these scenarios we’re making the assumption that the world accepts these rocks as “Money” and payment). In order to buy your dream home it’s going to take the total of your entire collection.

As you can imagine, you run into a couple of dilemmas:

• Transportation:
  How are you going to get all of these rocks to the seller? How many car trips? How many semi loads is this going to take?
  
• Damage Control:
  The seller was willing to accept your collection over others because you were able to keep everything in pristine condition. They’ve made it very clear they won’t sell to you if anything is damaged in transit.
  
• Safety/Loss/Theft:
  Unless you’re willing to move every single piece by yourself, what’s to say that the loading crew doesn’t take a piece or two they really liked when loading it up?
  Also, now you have a convoy of trucks carrying this precious “Money”, criminals are everywhere… What’s to stop them from targeting your load(s)?
  

As you can see, it becomes very cumbersome to use this as a form of “Money”, and in reality has been a problem with Gold for all of human history. That’s why today, a large majority of it is secured in deep underground vaults protected by armed guards and/or military day and night. This is why, to date, most of the world has defaulted to the ‘paper’ notes that we currently use.

Connecting the dots

Here, we’ve described the characteristics of Durability and Portability and tied each example back to the Dollar (or whichever currency your country currently uses). However, this is changing. Your bank account info is digital, and you can access it through an app on your phone. There are many Cryptocurrencies fighting to be the new form of “Money”, largely in part due to these characteristics. Consider the following:

Durability:

Computer code is written in electricity that flies across wires spread throughout the globe. You can’t hit it with a rock, you can’t rip it, you can’t light it on fire, it just… is?

Portability:

How hard is it to move a text message for example? I’m sure you’ve made more than one online purchase, how many semi trucks were needed for that transaction? Again, crypto, is just digital transfers of “Money” flying around on wires at the speed of light.

There are so many crypto out there right now, but the ‘big dogs’ are the ones that are trying to answer the call that our world, and society needs for the next “Money”.