Cryptocurrency and traditional currency value remains debatable. This is because the value of traditional currency is scalable, it mostly takes the intrinsic value of physical properties. The epitome is the process of gold extractions. Gold combines certain factors such as luster and purity content. Cryptocurrency does not have any extractions. In this part of the series, this article would focus on the construction of both traditional currency and cryptocurrency throughout history.
Traditional currency, in the modern age, like the government-issued currencies like paper money has the intrinsic value of scarcity like metals. Throughout history the value of money is similar to the amount of gold backing it. Some currencies today are also representative of something. It means that it could be used as a form of exchange for a certain amount of commodities.
However, as time passed, the value of currency changed in the 17th century. John Law, a prominent economist, led the change of currency value by stating that the value is a measure of its demand. Plus, it has the ability to stimulate trade and business. Modern monetary system theory is the reflection from this change.
As a result, countries began to be concerned about the gold supply. Thus, most countries started to abandon the gold standard. This becomes the reason why fiat is the classification of many global currencies. The backing of fiat currency is government, not commodity. It means that both the government and society are accepting together the value of the currency by faith.
Currently, major global currencies are fiat. This is because the value of fiat is durable and least susceptible to loss of value. The value of fiat lies in the function of demand and supply. The epitome is the U.S. dollar that becomes acceptable for major international trade.
