I've noticed this user recently starting threads in the Beginners and help board but unfortunately he's a copy paster.
User :
_bitbookCopy (
archive)
For something to be defined as a currency, it need to meet the following criteria:
1. Fungibility
For a currency to be fungible, its units has to be completely identical and interchangeable. For example, if you swap one US dollar for another, they are worth exactly the same amount of money.
The same applies to Bitcoin as an example, making it a fungible currency.
2. Shortage
For something to be considered a currency, is necessary a limited supply of it. Otherwise it would have no value.
Using gold as an example: If the amount of gold is limited ( and it is). There is a finite amount in the world, which gives it a value as a currency. Something similar happens with Bitcoin, only 21 million of them will ever be released, which gives Bitcoin its value. If anything, fiat currencies like the US dollar have the weakest amount of scarcity, because central banks can simply print more money when they see fit.
3. Durability
Because gold can withstand harsh weather conditions and there is no natural wear, we can rely on it to outlive us, which gives it its value. If we could not ensure whether our gold would still be around tomorrow, it wouldnt have any value as a currency.
Cryptocurrencies are arguably the most durable currency of all. As long as the network they exist on survives, theyll retain 100% of their value.
Given that the networks cryptocurrencies are stored on are decentralised, it would be almost impossible to destroy them, meaning their durability is essentially guaranteed.
4. Transferability
The purpose of a currency is to enable trade between people and the transfer of wealth from one entity to another.
5. Divisibility
Finally, a currency needs to be able to be broken down into smaller fractions or units.
One of the main reasons humanity moved away from trade and onto currencies is because its impossible to trade half a animal (especially if you want it to live!). However, if you only want half a dollars worth of something, you can just pay 50 cents for it. This is called divisibility. Cryptocurrencies are divisible too.
What is a currency?
For something to be considered a currency, it needs to fulfill these five criteria:
1. Fungibility
For a currency to be fungible, each of its units must be completely identical and interchangeable. For example, if you swap one US dollar for another, theyre worth exactly the same amount of money.
The same applies to Bitcoin, making it a fungible currency.
2. Scarcity
For something to be considered a currency, there needs to be a limited supply of it. Otherwise it wouldnt have value.
For example, there is a finite amount of gold in the world, which gives it a value as a currency. Similarly, only 21 million bitcoins will ever be released, which gives Bitcoin its value. If anything, fiat currencies like the US dollar have the weakest amount of scarcity, because central banks can simply print more money when they see fit. The reason the US dollar still has value is because the Federal Reserve controls its scarcity at all times.
3. Durability
Gold would make a terrible currency if it dissolved in the rain.
Because it can withstand harsh weather conditions and centuries of wear and tear, we can rely on it to outlive us, which gives it its value. If we couldnt be sure whether our gold would still be around tomorrow, it wouldnt have any value as a currency. Cryptocurrencies are arguably the most durable currency of all. As long as the network they exist on survives, theyll retain 100% of their value.
Given that the networks cryptocurrencies are stored on are decentralized, it would be almost impossible to destroy them, meaning their durability is essentially guaranteed.
4. Transferability
The purpose of a currency is to enable trade between people and the transfer of wealth from one entity to another.
For something to be considered a currency, you need to be able to easily transfer units of it to another person. Cryptocurrencies definitely tick this box, as they can be transferred from one individual to another regardless of geographic location (not to mention with relatively low transaction fees compared to fiat currencies).
5. Divisibility
Finally, a currency needs to be able to be broken down into smaller fractions or units.
One of the main reasons humanity moved away from trade and onto currencies is because its impossible to trade half a cow (especially if you want it to live!). However, if you only want half a dollars worth of something, you can just pay 50 cents for it. This is divisibility. Cryptocurrencies are divisible too. In fact, Bitcoins current lowest denomination is a satoshi, which is equivalent to 0.00000001 bitcoins.