Types
Not all 'forms of money' can be looked at as acceptable unless it falls under on of the three recognized types based on their sources of value. These include 1. Commodity Money, 2. Representative Money, and 3. Fiat Money. Luckily pretty must everything will fall under these categories.
Commodity Money:
"A commodity is an item that has value in and of itself. Good thing is that when people are willing to accept the commodity as payment, the commodity becomes worth whatever it can be exchanged for, in addition to its value as a consumable item." This type of money bundles with limitations and in turn is very risky. |
Representative Money:
Representative value lies in the value of the commodity it represents. In all actuality this type of money is basically a promise. This type of money can be risky at times, yet it is still a reliable means of transactions under certain levels and criteria. |
Fiat Money:
This type of money is money by decree. Governments can declare something to be their form of money when it is no longer feasible of wanted to use the commodity system. Because the decree that a specific item is money, it can be used throughout all transactions to and fro participants of the exchange. Luckily for it unlike its considerable to an extent risk taking counterparts it is the least risky and therefore a safer method of transaction. |