How does currency work?
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Lets use the intuitive example of gold. A person is willing to get paid in gold because it has an agreed-upon value and thus can be used to purchase goods or services. The purchase is just an exchange (“my gold for your car”). This works because everyone agrees on what the value of gold is.
Now if you get paid and then use that payment for a purchase, the gold served really only one function: a store of value. In this case, it doesn’t matter what the currency itself is made of, it could be monopoly money, it could even be digital these days…as long as it has an agreed upon value, and it has a controlled supply by a governing entity for stability. That is, it cannot be created out of thin air or found in nature. Which is why gold isn’t even a great ‘store of value’ item since it isn’t as easy to control its total supply. Also it has to be something that lasts, so something perishable, while technically could work as currency, would not make much sense.
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