2.5 Types of Money
Money encompasses two main categories: physical and digital, each serving distinct purposes in financial transactions and economies.
Physical Money:
Fiat Money: Issued by governments, fiat money includes paper bills and coins accepted as legal tender. Its value derives from government decree rather than intrinsic worth.
Representative Money: Represents a claim on a physical commodity, historically such as gold or silver. Examples include silver certificates that could be exchanged for silver.
Commodity Money: Physical objects with intrinsic value and widespread acceptance as a medium of exchange, such as gold and silver.
Digital Currencies:
Digital currencies facilitate online transactions and include various types:
Electronic Currencies: Digital counterparts of traditional currencies like dollars or euros, used for online purchases via digital payment infrastructure.
Stablecoins: Designed to maintain a stable value relative to a fiat currency or asset (e.g., US dollar).
Cryptocurrencies: A type of digital currency governed by cryptographic protocols, which can be decentralized or centralized.
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