Lessons from the History of Currency on Cryptocurrency

What is money? According to the Shinmeikai Japanese Dictionary, it is 'something devised as a medium of exchange, a means of payment, and a standard of price, created and issued by governments or central banks in certain forms and designs, whether as metal coins or paper money.'

Cryptocurrencies, which are not issued by governments or central banks, would not be considered money. In the world of economics, however, money is defined in a broader sense.

It is the total entity of value exchange information for goods and services, and the media that can store these goods and services. Generally, there are three conditions defined in economics for something to be considered money:

"① Unit of account (measuring the price of goods)"
"② Medium of exchange and circulation (intermediary in buying and selling)"
"③ Store of value"

Under these conditions, major cryptocurrencies like Bitcoin could well be defined as money.

What about lesser-known meme coins? Most likely, they do not meet the second condition. If we rephrase the second condition, it refers to liquidity.

To quickly gain liquidity, it is advisable to use products that have already achieved liquidity.

Stablecoins pegged to fiat currencies like the dollar or yen are an optimal solution for expanding the use cases of cryptocurrencies, responding to demands for broader usage.

Choosing a medium that embodies centralization like fiat currencies as the anchor for cryptocurrencies has faced some criticism. However, acquiring liquidity from zero is extremely difficult. Why is securing liquidity challenging? Human psychology plays a significant role in this.

This time, by studying the history of paper money, we will learn about the underlying aspects of liquidity.

This Time's Paper Money: "Chūtō Genbō Kōshō"