America’s oldest bank, BNY Mellon, announced a new unit to help clients hold, transfer, and issue digital currency. Tesla CEO Elon Musk revealed he had purchased $1.5 billion worth of the cryptocurrency and would soon accept it as a form of payment for cars. Twitter’s Jack Dorsey said that he and rapper Jay Z are establishing a Bitcoin development fund to make it as commonplace as cash. Mastercard said it would start accepting certain cryptocurrencies, allowing merchants to accept it as payment.
Is that why Bitcoin is enjoying its biggest price jump in its short history? Not really — but you need a primer to understand it. Before answering the question “What is cryptocurrency?” we need to ask the question, “What is currency?”
Wealth is what society — you, I, and the grocer — considers valuable, and it’s likely to remain that way. Chicken schmaltz with griven may be rare in one part of the world, but it’s not likely to hold its value, so it cannot be called money. Salt was once considered valuable and was used by ancient Rome as cash — salary comes from the Latin word for salt, sale. Perennial items of value include gold, silver, and precious gems. Many societies around the world minted small quantities of gold and silver in coins, which could be used in everyday economic transactions.
Eventually, governments began printing money, backing paper bills with reserves of gold bars they kept in secure storage. The creation of cash was a revolution; large denominations could be easily and securely carried around, while maintaining the two benchmarks required to be called money — it has value and will likely retain it. Theoretically, anyone could present himself at his government’s treasury and exchange a paper bill for the amount of gold it represented.
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