Medium of Exchange: Ever-Present Competition

Abstract

Digital currencies are only a recent innovation, and their widespread use is still a thing of the future. It is fit, however, to begin our investigation by looking into the past. In fact, we will start not only well before the digital era but also before the development of money itself. We do not intend to provide a comprehensive overview of the history of money here.’ Rather, in our discussion we will focus on the attributes of different currencies and the various economic needs that money serves. In historical perspective, we can analyze competitive forces that make some media of exchange more successful than others in satisfying those needs. We will later see that digital currencies can be successful only if they satisfy such needs as well as, or better than, the traditional currencies we already have in use.