Understanding Stablecoins: How USDT Powers Financial Inclusion

What Is Money?

Definition and Function of Money:

Basic Definition: Money is a medium agreed upon by parties to settle exchanges for products, goods, or services.

Core Role: It allows resources or services to be swapped for stored value, enabling efficiency and economic growth.

Value Derivation:

Money is obtained by expending time and energy (e.g., work, labor, or services).

Resources or goods exchanged for money also require time and energy to create.

Formula: Money = Time + Energy

Functions of Money:

Store of Value:

Money retains purchasing power over time, enabling saving and future planning.

Example: Gold historically holds value (e.g., one ounce could buy a suit centuries ago).

Medium of Exchange:

Money must be easily exchanged for goods and services.

Assets like houses are impractical as a medium of exchange.

Unit of Account: Money provides a standard measure for pricing goods and services, aiding in value comparison.Characteristics of Money:

As a Store of Value:

Durable: Money withstands time and wear (e.g., gold retains value even if physical coins deteriorate).

Scarce: Limited supply ensures stability and maintains value.

Immutable: Transactions cannot be arbitrarily reversed or altered, ensuring security.

As a Medium of Exchange:

Portable: Easy to carry and use across locations.

Divisible: Can be broken into smaller units for transactions of varying sizes.

Accepted: Widespread acceptance enhances trade efficiency.

As a Unit of Account:

Fungible: Every unit is interchangeable and identical, ensuring uniformity.

Money enables trade, savings, and economic stability, fostering growth and prosperity.

Not all forms of money equally fulfil its functions. Some excel as stores of value (e.g., gold), while others are better mediums of exchange (e.g., US dollars, Nigerian Naira, Ghana Cedi ...etc).

Future exploration includes how modern forms of money, like Bitcoin and stablecoins, align with these functions.

By fulfilling its roles effectively, money enhances individual confidence in transactions and supports the overall economy.