The barter theory is considered the main or classical one and is accepted by economists. However, there are also alternative views. Knowing them builds the complete picture of what money is and what its role is in the economy and people's lives.

 

Debt Theory

The debt theory is a relatively modern view proposed by anthropologists. They argue that barter, with its shortcomings, existed in parallel with the emergence and development of money, and still exists today.

It is believed that written documents on clay tablets describing debts, agreements, and interest date back to around 3,000 BC. Debt was still measured in goods, but without any physical exchange, i.e. this record actually represented a form of monetary expression. It is assumed that other exchangeable items, such as shells, were not actually universal goods for purchase but social money for society, through which debt was recorded and settled. Debt settlement was often carried out through mutually repayable payments. Ivan owes George, George owes Todor, Todor owes Ivan – respectively, no one owes anyone.

Imagine again what would happen in an economy with hundreds of producers and thousands of goods offered. How could this debt be recorded and accounted for without the existence of modern technological systems? It is for this reason that money emerged as a tool that allows debt to circulate without the need to maintain registers. In fact, before the advent of instant payments, mutually repayable payments were the basis of payment systems. But they still play an important role in their functioning today.

Other Theories

One of the alternative views is the so-called state theory of money. According to it, money is actually a social institution created by the state, since its value arises from the need to pay a tax obligation imposed by the government. Since the tax is paid in a certain currency, this guarantees its demand and gives it value.

Sociocultural theory accepts money as a social construct that arose and developed through rituals, symbolism, and trust. Accordingly, money is a means of expressing belonging, cultural values ​​and social status. There is also an information theory, according to which money actually builds a system for exchanging information, through which the coordination of economic entities is carried out.

Each of the theories emphasizes a different function of money. For barter, it is a means of exchange and is accepted as a universal commodity. For debt theory, it is a means of accounting for the obligation. In state theory, the focus is on the tax system, for which money is a legal unit. For the information system, it is a sign through which coordination is carried out. For sociocultural theory - a cultural artifact for symbolism and status. Each of the theories has its own arguments, and they can be considered in an integrated manner. Money is not just a tool, but a mirror of the relationships in society.

Money Today and Tomorrow

With the advent of crypto assets, some people have wondered whether this is not the next evolutionary step in the development of money. One way to answer this question is to seek compliance with the functions of money that have been established over the millennia.

Supporters of crypto assets believe that modern money has no real value because, after the abolition of the gold standard, it is not backed by precious metals. In fact, it is backed by all the assets of central banks - currencies, financial instruments, precious metals, other tangible assets. While trust in crypto assets stems solely from their users, in the case of money it is also guaranteed by the state. An advantage of crypto assets is their limited quantity. The fact that something is in limited quantity does not in itself mean that it has value. On the contrary, as already explained, deflation is an unfavourable phenomenon in exchange because it discourages consumption.

Secondly, money has served as a store of value. With the usual inflation targets of around 2-2.5% per year that central banks set, this function is not compromised. However, crypto assets experience extreme volatility (price fluctuations), which could otherwise only happen in conditions of hyperinflation. A significant number of them lose their value completely, and their trading stops. This volatility also completely hinders the function of measuring value because the price of each commodity would change within hours.

The advantages of crypto assets include fast and cheap transactions. Thanks to the development of technology, modern payment systems now also offer similar conditions. They do not have difficulties due to the large volume of transactions, which in the case of crypto assets often leads to significant delays and increases in the cost of transfers. Finally, the participation of a payment institution in transactions provides additional security for users, protecting them from inadvertent errors or fraud.

Of course, crypto assets have their advantages and potential applications, but the aforementioned considerations prevent them from being perceived as money.

In recent years, the world's leading central banks have been considering the concept of digital national currencies (CBDC - Central Bank Digital Currency), which are issued and guaranteed by them. Such an approach has both advantages and disadvantages that have yet to be discussed and addressed. The European Central Bank is also working on a project for a digital euro. It is important to emphasize that it is practically identical to the existing euro, the only difference being its digital form.