The 3 Fundamental Roles of Money

Fundamental Roles of Money

Fiat money is used as a means of exchange, either to buy goods or pay for exchange with services. However, the role of money could be more if there’s a more elaborate concept regarding the forms’ money can take. Other commodities like gold and natural resources are regarded as assets that could serve as a store of value. Money is simply defined as anything that could serve as a means of exchange. It could be in the form of assets, services, properties or other valuable assets. Note, money can be in any form and could take any form. So, inasmuch as it holds value and can be substituted for other valuable commodities, its money – a store of value. So, in a nutshell, money has three main fundamental roles: a unit of account, store of value, and a medium of exchange. 

But for technology, money was only majorly regarded as a unit of account and as a medium of exchange. Although money was also regarded as a store of value, it wasn’t as pronounced as the other two functions. With the development of cryptocurrencies, we began to understand the aspect of money being a store of value. So, it became possible to have an asset and hold it for a while it appreciates, and you can sell-off. Cryptocurrencies are digital assets that cannot be seen yet; their values are spendable and could be used as a means of exchange, a store of value, and a unit of account. There are, however, several cryptocurrencies, with bitcoin being the most successful of all by market capitalization. There are more than 300 known cryptocurrencies in the crypto community, with several projects being developed. One of the various crypto assets is ripple. Ripple price is pocket-friendly and trading below $1 so, it’s possible to accumulate as many ripples as possible before the value skyrockets. The roles of money are primarily into three different groups, and they include

Roles of money

As mentioned above, the fundamental role of money is divided into three

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As a unit of account:

Money is uniform and generally accepted, and because of this acceptability, it’s safe to be used as a unit of account. Being a unit of account, money can be easily used in both international trade and normal trade within a geopolitical l location. It’s possible to reside in a country and engage in trade because of the homogeneity of money. So, money as a unit of account is a unit of measurement of services, market goods and other financial transactions. In other, to formulate commercial agreements that might involve debts, money is relatively important. Money can be divided into smaller units, fungible and has a specific size and weight. 

Store of value:

For money to act as a store of value, it must be stored, reliably saved and could be easily retrieved. So, money being a store of value means it should be able to stand as a medium of exchange. Hence, cryptocurrencies like ripple, bitcoin and ethereum act majorly as a store of value. Ripple is an excellent crypto that could be used as a store of value because currently, ripple’s price is still pocket-friendly to accumulate. Most cryptocurrencies serve as an excellent store of value because it’s a digital asset whose value could only be measured online. 

As a medium of exchange:

Money is primarily used for buying and selling either in the traditional fiat form or as cryptocurrencies. So, with money, you can exchange your fiat for money. Also, you can sell your fiat for cryptocurrencies. But for money as a means of exchange, trading would have stayed via the barter system. Money as a medium of exchanges has seen the cryptocurrency community evolved into a more advanced niche. Cryptocurrencies could be exchanged from any reliable cryptocurrency exchange platform like Bitvavo, for fiat and vice versa. However, the difference between money staying as a medium of exchange is that with money in the traditional fiat form, it cannot be increased; for example, if you have $5, and you keep it for a certain period of time, it remains $5 without accumulating or reducing. However, if you purchase ripple for that same $5, it tends to increase to twice that price or reduce to that same level. Money in the form of crypto is digital, hence regarded as digital assets. 


Cryptocurrencies could serve as a medium of exchange and as a store of value. So, it’s safe to keep your assets in form of crypto because while your money won’t increase with the traditional fiat, it would because asides cryptos being a medium of exchange they are also valuable assets better than gold. 


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