Forms and Functions of Money
Money exists in many forms, each serving different roles in the economy. Below are the main forms of money:
1. Metallic Money
Money made of metal such as gold or silver, existing in the form of coins.
a) Full-Bodied Coins – The face value of the coin is equal to the value of the metal it contains. Example: gold and silver coins of old times.
b) Token Money – The face value of the coin is greater than the value of the metal it contains. In most countries today, all coins are token money.
2. Paper Money
Refers to notes of different values made of paper, issued by the central bank or government.
a) Representative Money – Fully backed by equal metallic reserves; can be converted into gold or silver on demand.
b) Convertible Money – Can be converted into metallic reserves, but not fully backed by them; the government holds only a proportion of the value in gold.
c) Inconvertible (Fiat) Money – Has no intrinsic value; declared legal tender by the government. Example: a $100 note has paper worth almost nothing, yet its purchasing power equals $100.
3. Bank Money
Also called credit money, consisting of:
a) Cheques – An unconditional order by a client to their bank to pay a specific amount.
b) Bills of Exchange – An order by the drawer to the drawee to pay a sum of money to the drawer or another party.
c) Drafts – A cheque drawn by a bank on its own branch or another bank, requesting payment to a named person.
4. Legal Tender Money
Money accepted by law as payment for debts.
a) Limited Legal Tender Money – Can be used for payments up to a certain limit.
b) Unlimited Legal Tender Money – Can be used for payment of any amount.
c) Non-Legal Tender Money – Optional money that people may choose not to accept; e.g., cheques or promissory notes.
5. Plastic Money
Credit cards, smart cards, and other plastic-based payment methods.
6. Standard Money
The monetary unit in which prices and other forms of money are measured (e.g., the US dollar in the USA). Always made of unlimited legal tender money.
7. Near Money
Assets that can be easily converted into money, such as deposits, government bonds, and treasury bills.
8. Fiduciary Money
Relies on public confidence for value, not declared legal tender by the government, but can be exchanged for commodity or fiat money. Examples: cheques, banknotes, drafts.
9. Commodity Money
Commodities with intrinsic value used as a medium of exchange, such as salt, cattle, gems, beads, gold, and silver.
Functions of Money
The main function of money in an economy is to facilitate the exchange of goods and services. It performs the following functions:
1. Primary Functions
a) Medium of Exchange – Eliminates the need for double coincidence of wants in barter trade and enables specialization and division of labor.
b) Unit of Account / Measure of Value – Provides a common standard for valuing goods and services, enabling organized marketing and production.
2. Secondary Functions
a) Store of Value – Allows wealth to be stored for future use.
b) Standard of Deferred Payments – Simplifies borrowing and lending by maintaining a relatively stable value over time.
c) Transfer of Value – Enables value to be transferred between people and locations.
3. Contingent Functions
Includes incidental roles such as aiding decision-making, serving as a basis for adjustments between money and capital markets, and facilitating foreign exchange adjustments.
Modern Economic Context
The US dollar remains one of the strongest currencies, connecting economies worldwide and facilitating trade. However, since 1971, the dollar has not been backed by gold. The US government has been printing large amounts of money, contributing to a national debt of $55 trillion, which risks hyperinflation and erodes public confidence in the currency.
The Internet: Meaning, Function, and Opportunities
The internet is a vast, global network of interconnected computer networks that allows billions of devices worldwide to connect and share information. Think of it as a “network of networks” where computers, smartphones, and other smart devices can communicate with each other. This massive infrastructure enables many of the services we use daily — from sending emails and browsing websites to streaming videos and engaging in social media. It’s a decentralized system, meaning no single entity owns or controls it entirely.
How Does It Work?
The internet functions through a system called packet switching. When you send or receive data — whether it’s a message, a photo, or a webpage — it is broken down into small pieces called packets. Each packet travels independently, possibly taking different routes to its destination. Once all the packets arrive, they are reassembled in the correct order.
This process uses a set of rules known as protocols, the most important being:
IP (Internet Protocol): Like a postal address, it ensures packets are sent to the correct destination. Every device connected to the internet has a unique IP address.
TCP (Transmission Control Protocol): Ensures that packets arrive successfully and are reassembled in the right order.
Packets travel through a physical infrastructure of fiber optic, copper, and coaxial cables, as well as wireless technologies like Wi-Fi and cellular networks.
A Brief History
The internet’s roots trace back to the 1960s with ARPANET (Advanced Research Projects Agency Network), funded by the U.S. Department of Defense to create a decentralized communication network that could survive even a nuclear attack.
A major milestone came in the 1970s with TCP/IP, which became the standard for network communication. In 1989, Tim Berners-Lee invented the World Wide Web, making the internet user-friendly and accessible. The 1990s saw explosive growth as the internet entered homes, businesses, and schools worldwide.
Internet vs. World Wide Web
These two terms are often confused:
Internet: The global network of computers and devices.
World Wide Web: A service running on the internet — a collection of websites and webpages accessed via browsers.
Other internet services include email, instant messaging, cloud storage, and file sharing.
Advantages of the Internet
Access to information on almost any subject.
Powerful search engines for quick research.
Ability to research from home without visiting libraries.
Content for every level — from children’s materials to scholarly articles.
Forums and message boards for exchanging ideas.
Free email services.
Video conferencing platforms like Zoom for global communication.
Online homework help and learning resources.
Disadvantages of the Internet
Presence of incorrect or misleading information.
Online predators posing risks to unsuspecting users.
Potential for wasting significant time.
“Cheater” sites selling academic work.
Hackers creating viruses to damage data.
Risk of identity theft.
The Need for Decentralization
While the internet is powerful, tech giants like Google and Facebook profit from user data, often without giving users a share in the value created. This leads to issues like fake calls, spam messages, fraud, and privacy breaches.
Web3 and peer-to-peer (P2P) networks aim to address this by giving users ownership of their own data and removing middlemen. This shift can create a fairer digital economy where people can participate as both buyers and sellers.
A Shift in Human Opportunity
Two hundred years ago, most people in the world lived similar lives regardless of location — primarily as farmers, rarely traveling more than 10 miles from where they were born.
Today, the internet has transformed human life by enabling wealth creation, global communication, and opportunities for anyone, anywhere.
Choose the best opportunities that help you grow in the financial market — because with decentralization, ownership, and digital innovation, the chance to take control of your economic future has never been greater.
Blockchain Overview
Blockchain is a decentralized digital record of transactions using distributed, double-ledger technology. Transactions are immutable, meaning they cannot be altered once recorded. Bitcoin was the first cryptocurrency introduced by an anonymous creator, using blockchain as a peer-to-peer (P2P) network based on the proof-of-work mechanism. Transactions are grouped into blocks and stored on a public ledger that anyone can view at any time. These records are permanent.
Blockchain is more valuable than the internet in certain aspects because it is built on trust and can potentially replace traditional financial systems by enabling tokenized assets. Over time, blockchain can eliminate middlemen and agents.
There are different types of blockchain, but we will focus on:
Public blockchain (permissionless)
Private blockchain (permission-based, enterprise solution)
Public Blockchain (Permissionless)
Public blockchains, such as Bitcoin’s blockchain, are visible to anyone and open to public participation.
Key features:
Access: Fully decentralized. Anyone can join, read, write, and verify activities. No single entity controls the network.
Identity: Users are pseudonymous, identified only by wallet addresses.
Speed: Slower than private blockchains due to decentralized governance and a large number of users.
Governance: No single entity can dictate rules or shut down the network.
Security: Highly secure due to the large number of nodes, eliminating single points of failure.
Private Blockchain (Permission-Based)
A private blockchain is run by a centralized entity. Access is restricted to approved participants.
Key features:
Access: Requires permission from a central authority. Access levels and restrictions can be customized.
Identity: All participants are verified and identifiable.
Speed: Faster transactions due to centralization.
Governance: Rules are set and enforced by the central authority.
Security: Offers more privacy and strong cybersecurity within its controlled environment.
Bitcoin’s Role and Limitations
While Bitcoin was designed as a digital currency, it has largely been adopted as a commodity and store of value.
In theory, P2P transactions work well in trusted environments, but enabling secure transactions in untrusted environments (P2P, P2B, B2B) remains a challenge. Centralized exchanges like Coinbase and Binance benefit from this gap, acting as intermediaries and controlling user data—similar to traditional banks providing account numbers or keys.
Privacy Model Example – YEMChain
Identities: Decentralized digital identities for individuals, businesses, and organizations. Ownership is verified through zero-knowledge proofs (e.g., “prove you are human” systems like Google reCAPTCHA).
Transactions:
Offer sent to receiver
Offer accepted
Funds released after payment confirmation
Works for P2P, P2B, and B2B
No middleman involvement
Maintains decentralization and direct ledger recording
Coins vs Tokens
Coins: Have their own blockchain (e.g., Bitcoin on Bitcoin blockchain, Ethereum on Ethereum blockchain). Creating a coin requires years of research and development.
Tokens: Built on existing blockchains. They may represent something useful (e.g., tokenized assets) or have no real value. Most public blockchain tokens are useless, but the tokenization concept for startups, real estate, stocks, and bonds is powerful.
Blockchain education empowers individuals and businesses with knowledge about secure, decentralized technology driving the future of digital innovation.
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