What is money
And why it is important
Money is the technology that is used for efficient exchange of goods and services.
In essence, money is a device that enables trade of goods and services without any friction. Money should also retain its value for long.
If there is friction or lack of scarcity value of the current device, new form of money takes over - because people for their own benefit adopt the new money.
What is money has been always been decided by people and not governments. Gold was money way before governments adopted the gold standard to print currency notes. Salt, cows and glass beads were money long before governments existed.
But people always choose the money subconsciously, based on some “moneyness” properties.
6 properties of money (moneyness) -
Durability - gotta last long (through rain and storm)
Portability - transport it across long distances
Divisibility - to pay for coffee :-)
Uniformity - each unit should look the same
Limited supply - scarcity to retain value for long
Acceptability - easily recognized, verified and accepted
If even one of these properties is not met, the acceptability of that money goes down over time as more and more people reject it.
For example, acceptability of roman coins went down when Roman empire increasingly reduced silver from their coins and minted unlimited number of coins impacting the 5th property - Limited Supply. This ultimately led to the collapse of Roman empire.