The functional anatomy of money and the systemic role of digital currencies

The development of human economic systems is inextricably linked to the evolution of means of exchange that go far beyond the simple exchange of goods and make complex markets possible in the first place. A universal exchange of goods takes on, to a certain extent, additional essential tasks in the secondary operation, which guarantee the smooth running of economic processes. To the nature of these systemsTo understand in depth, one must distinguish between the abstract functions of money and the concrete material or immaterial characteristics of a suitable medium of exchange. This differentiation is fundamental, since the presence of certain characteristics does not automatically guarantee the assumption of all monetary policy roles, but only the theoretical potential for thisrevealed.

The classic functions and their specialized fulfillment

In economic theory, three primary functions of money are usually named, which form the indispensable foundation of every monetary order. First of all, it serves as a general medium of exchange, which makes direct and inefficient goods exchange superfluous and considerably simplifies transactions. Second, it acts as a measuring instrument for determining the price, making it asThe unit of accounting makes the relative value of different goods comparable to each other. Thirdly, it takes on the important role of storing value by conserving purchasing power over a certain period of time. It is, however, crucial to understand that these three monetary policy functions do not necessarily have to be fulfilled by one and the same well.

The limits of money as a generalist in the economic cycle

In practical application, it is quite common for specialized assets to take over some of these tasks far more efficiently than the classic money itself. For example, if you look at the function of value storage, every money must at least fulfill this task to a certain extent, but it does not claim to have a particularly goodto be long-term storage. This specific task is far more effectively perceived in our current financial system by fixed-income securities such as bonds. The same applies to the function as a measuring instrument, because pure nominal amounts are only suitable to a limited extent for long-term comparisons over time. Instead, a price index adjusted for the currency devaluation would be forSuch analytical considerations are the much more suitable tool, which is why the money is only considered a generalist who is supplemented by other instruments.

The emergence of a new class of intangible goods

If one lists the theoretically desirable properties of an ideal exchangeable material systematically, it quickly becomes apparent that a new class of intangible goods has exactly these characteristics. These are decentralized cryptocurrencies, the most prominent representative of which is the Bitcoin system. That this agreement exists is by no means a random product of themarket development, but the result of a conscious and targeted construction. The underlying protocol was designed intentionally to combine the currency-specific properties mentioned. In this way, a digital commodity was created that is particularly good for taking over the classic functions of money under certain conditions.

Transparency and robustness of the decentralized data chain

An outstanding feature of this technology is verifiability, since the underlying decentralized data chain is designed in such a way that the authenticity of each transaction can be verified in a particularly transparent and comprehensible manner. This mechanism corresponds functionally to the historical coining of coins, which means that the authenticity is not in every case by physical weighingor consequently have to confirm complex examinations. Another decisive criterion is durability, because the architecture of this system is designed to be potentially operated over extremely long periods of time. The network is distributed over numerous independent computers and the network proves to be extremely robust to unforeseen external influences.or targeted attacks.

The immateriality and the lack of primary benefits of the digital good

Since this currency is a purely digital commodity, it is not subject to any physical wear and is not consumed in any way by mere use. However, it must be admitted that users repeatedly lose cryptographic access to their holdings, which means that the total number that is effectively in circulation will tend to decrease over time,if this loss exceeds the new units that are added by the digging. In addition, this digital asset has a minimal to no primary benefit in the material sense as a purely calculating unit for almost all economic operators. It is probably one of those goods that realize the least independent utility value of all, which is why it is also from thisfundamental reason can neither be classified as non-cash or as commodity money.

The theoretical divisibility and irrelevance of absolute sets

Another significant advantage is the divisibility, because since the transactions only represent digital entries in a distributed register, they can potentially be divided into any small units. There are theoretical calculation limits here too, up to which the maximum size difference between the largest and the smallest can be representedTransaction can be enough, but this margin is many orders of magnitude larger than all physically mapable quantities. Due to this extreme divisibility, the absolute level of the exchange value of a single unit is not relevant, since a suitable numerical value can always be found. Likewise, the absolute total quantity is that it loses importance due to divisibility,Because you can always multiply the existing number by a suitable factor in order to handle the business of the real economy without any problems. The original quantity limit is fixed in the basic version of this system, but to what extent this remains permanently in the practical application and whether this represents a desirable property is used in specialist circles in contextpossible residual emissions still separately and controversially discussed.

The challenge of acceptance and systemic change

However, it remains an open and central question as to whether the mere equipment with these technical properties is already sufficient to make this digital good a true universal material. It must be accepted by users so broadly that it actually takes on the monetary policy functions mentioned in reality, be it all or just a few of them.Even if all these advantageous properties are undoubtedly present, there is a well-established environment in the real world in which the market participants have already successfully coordinated other, traditional goods. The perceived advantage of a completely new value infrastructure must therefore be particularly high in order to displace the established systems. there oneSuch a re-coordination to another exchange of goods system is extremely difficult to achieve in an already steady state, and there is much evidence that such fundamental change is most likely to occur in times of great economic or political instability.