Abstract

People have said for generations that money is based on "trust," or "shared fiction." But that doesn't explain why cultures all eventually come to value the same metals or items as money. Others have said that the value of money depends on the way it facilitates trade, but even that doesn't explain where the value emerges before people agree to use money to trade. In actuality, there's a real value to gold, silver, and other forms of money that makes them reliably gain worth to people, and will emerge eventually even if everyone in a society does not like or believe in those precious metals or possessions. This is because possessing scarce objects has real reputational value among people, since having those objects indicates that we can go outside the known territory, and we instinctively collect and want things that have known scarcity. When that scarcity combines with other traits like transferability, durability and so on, we can see that money naturally emerges in society. We can use this idea to also see the real value and desire that people have for new forms of money like cryptocurrencies, and to know what will or won't emerge and last as a form of money in the future.