Cryptocurrency as Money — Store of Value or Medium of Exchange? – Op-Ed Bitcoin News

**The following article was written by Kristoffer Mousten Hansen and Karras Lambert and published on September 28, 2022. Cryptocurrency as Money — Store of Value or Medium of Exchange? was originally published on mises.org. The opinions expressed in this article are the authors’ own. Bitcoin.com is not responsible for or liable for any opinions, content, accuracy or quality within the op-ed.**

Cryptocurrency enthusiasts generally have a great appreciation for the Austrian school of economics. This is understandable since Austrian economists have always argued for the merit of privately produced money outside government control. Unfortunately, an erroneous understanding of the development and functions of money has emerged and become increasingly dominant among at least some proponents of bitcoin — a narrative that is at odds with the basics of Austrian monetary theory.

In this view, which can perhaps be traced to Nick Szabo’s essay emphasizing collectibles, the primary and predominant function of money is as a “store of value,” or this function is on par with the medium-of-exchange function. According to this view, a commodity must first “transmit value” over time. It can then be used as a medium of exchange before finally becoming established as a unit of account.

This account gets the emergence and function of money backwards: the primary and indeed sole essential function of money is as a medium of exchange. Its status as a “store of value” (more on this phrase below) is incidental, while the function of unit of account is nonessential, as there have been many money commodities throughout history that were never used as units of account.

The Austrian tradition, from Carl Menger to Ludwig von Mises and Murray Rothbard, has always insisted that money is in essence a medium of exchange, with any other so-called functions being incidental and, in the case of “store of value,” metaphorical. In what follows, we explain this position.

On Value

To understand the nature of money, we first review the theory of value. Austrians have always emphasized the subjective nature of value. It is not something intrinsic to goods but always relative to the acting individual and his potential choices. At the moment of choice, he confers value on an object by preferring it to other objects. An object can be valued either for its usefulness in directly achieving the acting individual’s end (as a consumer good), for aiding the production of…