Types of Money

Money has taken a number of diverse forms.

Fiat is any money that is not backed by a commodity, such as gold or silver, but is government issued. The value is derived from the supply or demand of the currency, as well as the stability of the issuing government. Fiat money allows central banks and governments to have enhanced control over the economy due to their ability to control how much of the fiat money is printed. Examples include the USD, AUD and the British Pound. These governments declare it as legal tender, thus, it has to be accepted as a form of payment everywhere. Currently, fiat money is the money type that is being used globally. 

A commodity is a prime agricultural product or raw material that can be sold and bought, such as precious metals, grains, beef, oil, gold, alcohol, salt, beads and natural gas. It is often used as a basic good in commerce and is interchangeable with other commodities, making it a medium of exchange with its value gained from the scarcity of the item. Essentially, the use of a commodity as money is like using the barter system as it you can directly exchange one commodity for another. However, unlike the barter system, commodities as a form of money can function as a unit of account, allowing users to compare the worth of different goods and services.  

Representative money is money that exists as physical mediums such as paper money, token coins or tokens such as certificates, which have no value of their own. Unlike fiat money, it is backed by a commodity. For example, it is far easier to carry a verified certificate stating the worth of gold, rather than a chest of gold.

Fiduciary money is money not declared legal tender by a government, thus, citizens are not required to accept it as a means of payment by law. Examples of this may be cheques, banknotes or drafts. 

Commercial Bank money is claims against financial institutions such as banks, that can be used to purchase goods or services. For example, funds in a checking account. It is a debt-created currency by the bank. Cryptocurrency is peer-to-peer based money, such as BTC, ETH, BNB, DOGE and more. This type of money is based on blockchain technology, used as a medium of exchange for the exchange of goods and services or originally compensation for processing and verifying transactions on a blockchain.