Money as a store of value

Money also needs to be a store of value, meaning that it maintains its value, or purchasing power, over time. This eliminates any commodities or objects prone to spoilage or corrosion. For example, precious metals, such as gold, silver, and platinum, are a great store of value, as their shelf lives are essentially perpetual, whereas things such as milk, wheat, or iron, are not such good stores of value.

Another desirable characteristic of money is scarcity, which, as the name suggests, means that it needs to have a limited supply. As they say, money doesn't grow on trees. If it did, it wouldn't be money.

To give you a few more examples, consider the following:

• Stones wouldn't make for a very good form of money, because they are around everywhere in nature
• For a community of people who live on a tropical island, shells would not be a good form of money, because it would be so easy to find them on the beach
• Gold, on the other hand, is a rare metal, is hard to find in nature, and is universally appreciated for its aesthetic qualities and its industrial use cases

Gold is also durable. А gold coin will not shatter if you drop it, nor will it bend if you sit on it. However, with the right skills and tools, it is divisible, it can be turned into things, and it can be shared, if necessary.

Fungibility is another key feature of money, meaning that all units of the same denomination are interchangeable. Think about a hundred dollar bill, which is perfectly replaceable by another hundred dollar bill.

Finally, money needs to be easy to move and carry around, in order to facilitate trade; here is the only advantage of paper money over gold coins and bars. This is even more true in the case of electronic money, since everyone has access to the internet!