Monetary commodity and monetary units

One of the main conveniences of money is monetary calculation. It is conducted in abstract monetary units, and not in units of the monetary commodity. If your money is sheep, a trader can conclude a deal without having the faintest idea which particular sheep are being discussed and where they will come from at all. The homogeneity of the monetary commodity (hoes are more homogeneous than sheep, gold is more homogeneous than hoes, and bitcoin is more homogeneous than gold) is an important competitive advantage of some money over others precisely because it brings the units of the monetary commodity closer to the abstract monetary units in which calculation is conducted. You do not need to spend separate effort to make sure that the sheep you are exchanging your goods for are alive, young, cheerful, healthy, and sufficiently well-fed.

However, there is one giant “but” here. The former gold receipts that we use today as money are as homogeneous as bitcoin (most of them exist simply as “entries in bank books”). They are maximally abstract and convenient for monetary calculation. However, they are the cause of the enormous and unnecessary sacrifices that we all make. Why? Why must there be a monetary commodity behind the monetary unit, or speaking economically, why must the production of a monetary unit be subject to the same choice from available alternatives and the same assessment of profits and costs as any other commodity? Because only in this way can the question “how many monetary units there should be” and “how quickly their quantity should change” be solved. There is no other way to find out, except the one that has already been implemented by human practice — to delegate this decision to “the market,” that is, to make it dependent on the practice of many people who use the monetary commodity as a monetary unit. When the commodity ceases to be suitable for the role of money, the market will replace it with another, and this will happen gradually and with minimal costs.

By the way, mining is a huge pillar of bitcoin. It “ties” it to the real economy and human activity.