What actually is money? My attempt at an answer

Bitcoin naturally forces you to question what actually is money. A common answer is to say it's a store of value, medium of exchange and unit of account. This describes what money does but not really what it is. Another common answer is to say it's a solution to bartering. Again a fine answer, but I feel it doesn't get to the heart of the matter. Here I hope to provide a complimentary answer which I hope can give a useful, alternative perspective.


Human beings are creatures that deal with information. Our ability to mentally juggle with complex layers of information is one skill of ours that separates us from animals. The information, it is hot, here is where we sleep, here is where we can go for food is information that even many animals can work with. But humans have the unique ability to go far, far beyond that.

Since we deal with such sophisticated levels of information, humans need tools to aid us in this process. Just as an animal has "tools" (example: a spider's web, a dog's nose) to aid it in whatever it does, humans require tools to aid us in our ability to deal with complex information.

Examples of information that humans use tools to manifest.

Basic, general information

If I have some information, such as there is a river in the forest, this is how to tie a knot, how do I exchange this information with others? I could draw a picture. I could write it down. I could speak it to others. All these things are tools with allow us to manifest this information, both to ourselves and to others.


Measuring weight needs to be consistent and accurate not just for individuals, but for collections of humans. If I am a cook, a chemist, a metalworker etc, I need to be consistent in my usage of materials. If I am trading with you, I would like to know that your idea of a kilogram is the same as mine. Scales are a solution to this problem, and allow us to reliably and accurately measure the information that is weight.


Time is information. Whether it is the time of day, week or year. Humans have found it extremely useful to figure out ways to accurately pinpoint the passage of time. This is a technology problem. A rough, early solution was the sun dial. Later solutions involved mechanical pendulums and gears. In the 1700s, John Harrison's invention of the marine chronometer was so important it revolutionised sea travel. With today's technology humans can reliably and accurately keep track of every microsecond of every day. What we see here is that improvements in technology can improve our ability to manifest the same information. A sun dial and a digital clock are both expressing the same information (time of day), yet the clock is a much superior tool.


By now you can see where this is going. The information that is value is perhaps the most important piece of information that humans deal with. Without value, you have nothing to aim at. If I am thirsty, I place high value on water. If I am hungry, on food. If my kingdom is under attack, on soldiers. Value dictates all human action. Or perhaps the converse is true: Human action defines value. Who knows. You could write and debate forever on what value actually is and what defines it economically), so that won't be done here. But to keep it short: Value is information.

Interestingly, even some animals seem to be able to comprehend that idea of value on a basic level. Here are two amusing videos which show dogs and monkeys understand it: one, two

Just as scales manifest the information of weight, clocks manifest the information of time, money manifests the information of value. Value is such a complicated piece of information a tool is absolutely essential for us to use it. It is simply infeasible for any large group of humans to function without a specialized tool which aids in accurately and reliably expressing value. Living in a tribe, it is perhaps feasible to keep track of who did a favour for who and who contributed more or less to any particular task. But beyond the size of a tribe, it is simply infeasible. A tool is required.

Just like our ability to express time has improved with technology, so to has money. Humans have used various tools as money over time. Beads and shells were once used. Metal coins were once used. Today, Bitcoin is up and coming latest step in this progression.

Radio waves

Just to quickly finish off, humans have recently developed tools which allow us to use forms of information we once didn't even know existed. Radio being an obvious example.

The above examples are all ways human manifest different kinds of information. These tools have some similarities and some differences in their properties

Perfecting money and endless task for humans. Arguably, there is little need for us to further develop our capacity to measure time, weight and distance (beyond very extreme cases for scientific inquisitions). But the problem of perfecting money is still something that we are still striving for. Is Bitcoin the next step? It certainly has the potential to be, though anyone who says they know for sure is … optimistic.

In conclusion: Value, just like time, weight, distance, energy is an abstract concept – it is information. Money is the manifestation of value. Money gives form to value. It augments our ability to actually use this information reliably and accurately. A good money is necessary and essential in the same way as good clock or a good language is. Humans are creatures that revolve around information and so our tools for performing this task need to be up to scratch. A better form of money can drive civilization forward just as John Harrison's better time keeping device once did.

submitted by /u/BTC-maxi
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