What is money, really?
Before Bitcoin makes sense, money itself has to.
Explorer · 8 min · Updated 2026-11-08
💡 Money is a shared scoreboard
Imagine a cricket match where everyone agrees on the scoreboard. The runs are not physical objects — they are a record everyone trusts. Money works the same way: it is a record of who is owed what, and its value comes from how many people trust and accept that record. Gold, banknotes, bank balances and Bitcoin are simply different scoreboards with different referees.
The three jobs of money
Economists say anything that does these three jobs well works as money:
| Job | What it means | Everyday test |
|---|---|---|
| Medium of exchange | People accept it for goods and services | Will the shop take it? |
| Unit of account | Prices are written in it | Is the menu priced in it? |
| Store of value | It still buys roughly as much later | Will it buy the same groceries next year? |
Today, national currencies (rupee, dollar, euro) do all three jobs inside their countries. Bitcoin and most crypto assets mostly compete on the store of value job — and they do it with very high volatility, which is why they are poor units of account for daily life.
Inflation: the invisible tax on cash
Inflation means the general price level rises, so each unit of money buys less. Central banks in many countries target around 2–4% a year. That sounds small, but it compounds. A handy shortcut is the Rule of 72: divide 72 by the inflation rate to estimate how many years it takes prices to double. At 6% inflation, prices double in about 12 years.
Who controls the scoreboard?
- Bank money — your account balance is a promise from a bank, backed by regulation and deposit insurance up to limits.
- Central bank money — notes and reserves issued by a central bank that can expand or contract supply.
- Bitcoin — a public ledger maintained by thousands of independent computers, with issuance fixed in software (max 21 million BTC). No single referee can change the rules alone — but its price in rupees or dollars can swing wildly.
Why this matters for you
Crypto is often sold as "escape inflation" — but an asset that can fall 70% in a year (as Bitcoin did in 2022) is not a safe place for money you need soon. Understanding money first helps you put crypto in the right box: a high-risk, high-uncertainty asset, not a replacement for an emergency fund.
🧮 Practical example: ₹1,00,000 under the mattress
Key takeaways
- Money = a trusted record that does three jobs.
- Inflation compounds: Rule of 72 shows how fast prices double.
- Crypto mostly competes as a (volatile) store of value.
- Never put emergency money into volatile assets.
Education only — not financial advice.