What is money, really?

When you think of money, you probably picture coins, notes, or maybe numbers shown in the banking app. But what is it, really?

Before money existed, people used barter: trading goods directly (like rice for cloth). 

Imagine you want a sandwich, and your friend, who has that sandwich wants your notebook in return. That’s an easy trade. But what if you had to buy it from a sandwich seller who doesn't care about notebooks? 

That’s the problem with barter… it only works if both sides have exactly what the other wants. That’s called the “double coincidence of wants”, and it was super inefficient.

To solve this, societies created money which is something everyone agrees to accept. It solved the problem by acting as a: 

1. Medium of exchange : You can buy anything with it. (Your notebook will not always buy you food, but money will.)

2. Store of value : Unlike apples that rot, money holds value over time. You can save it today and spend it later in the future.

3. Unit of account : Everything can be given a price and compared according to their vlue. (A sandwich is around ₹100 and a book is ₹200)

But here’s the twist: money has no value on its own. A ₹500 note is just paper. It works only because people trust it. The Indian government guarantees it has value, and people agree to believe in that system. Additionally, more than 90% of the world’s money today doesn’t even exist physically. It's all digital in the form of UPI transfers, debit cards, Paytm wallets etc. 

Money has taken many forms over the centuries, from shells and cattle to even salt. (Fun fact: the word salary comes from salarium, Latin for salt, because Roman soldiers were sometimes paid in it.)

So what is money? In the end, it’s a collective belief that people agree to everyday.