Medium of Exchange

A medium of exchange is anything commonly accepted in trade to buy goods and services. In earlier times, people used objects like shells, beads, or gold for this purpose, but these didn’t always meet the ideal requirements: they needed to be scarce, durable, easy to carry, easily divided, and interchangeable with others of the same kind.

Nowadays, paper currency (fiat money) fills this role around the world because it’s easy to spend, break down into smaller amounts, and recognized by almost everyone. In some places facing economic turmoil, or in unregulated markets, digital currencies like Bitcoin are used to make transactions when traditional money is unreliable. As digital currencies become more widely accepted and easier to use, they may play a bigger part as mediums of exchange.