Is crypto money? Continuing this discussion, today we're looking at crypto's ability to serve as "a measure of value." To recap, the four functions of money are:
- A medium of exchange
- A measure of value
- A standard of deferred payment
- A store of value
Measure of value
Money is the standard that allows us to exchange goods and services without bartering. It's easy enough to trade pokemon cards, but life would be much more difficult if you had to make a trade every time you wanted to buy something. Your weekly trip to the grocery store would be more cumbersome, and making large purchases would be nearly impossible. Money acts as a measure of value when anything can be traded for money and money can be traded for anything.
This is important for pricing labor as well. There have been multiple efforts in the past to create local currencies demonimated in hours of labor. The problem with this approach is that it neglects the different values people can offer. If my one hour can save you ten hours, I should be able to charge you 5 times your hourly rate. This is why it's important for currency to measure value instead of more subjective inputs.
Cryptocurrency certainly can serve as a measure of value. It has all the necessary qualifications. However, it isn't currently a very good measure of value because it isn't widely accepted. Stores don't measure the value of their goods in Bitcoin. The majority of Bitcoin holders aren't trying to spend it, they want to hold it and speculate on the future value.
In order for cryptocurrency to be adopted as a measure of value, it needs to be the medium of exchange. You can't have one without the other.
P.S. How do you define "value"?