Primary Function – medium of exchange

A medium of exchange is the primary function of money, as it is a financial instrument used to facilitate the sale, purchase, transfer or trade of goods and services between parties. Generally, in economics, a medium of exchange will be any item that is widely acceptable in exchange for goods and services, thus, money (represented by a currency) is a medium of exchange.

Money as a medium of exchange in an economy allows for increased efficiency, stimulating further trading activity. Being a medium of exchange, money seeks to eliminate the double coincidence of barter, as money is always something the opposing party desires, rather than running the risk one party does not want a commodity the other party has (in a traditional barter system). It also allows anyone to participate in the market as an equal player. As goods or services are purchased using money via consumers, these consumers are effectively bidding on goods and services that are being charged at specific prices. This means consumers can plan their spending budgets around predictable pricing, as producers know the quantities to produce, and how much to effectively charge. Both the buyer and the seller understand the value, thus, money is used as the medium of exchange. 

For example, if someone were to offer a pig as payment for a cryptocurrency mining rig, there would be some confusion about the value of the pig. The two parties may disagree on the value of the pig in swapping it for a mining rig. This is why money is important. Both parties understand the value in exchange.