What is Medium of Exchange?
Let's find out Medium of Exchange meaning, definition in crypto, what is Medium of Exchange, and all other detailed facts.
A medium of exchange acts as an intermediary instrument that aids sales, purchases, or trades. Currency is one of the most widely used mediums of exchange. If the money that the currency represents were to lose its viability as a medium of exchange or could no longer be valued accurately, consumers would become unable to plan budgets or determine the demand and supply.
The use of mediums of exchange provides more economic efficiency and can lead to the overall trading activity increasing over time.
In the traditional barter system, two parties can trade when one party has a commodity that the other party wants. A trade cannot occur if both parties want the same commodity that one of them owns.
Trades that involve a medium of exchange mean that the intermediary asset can aid trading in the marketplace. If one party has a desktop computer but wants a laptop, they can sell the desktop for gold or money and then use the acquired medium to buy a laptop.
Money can act as the equalizer of trading, as anyone who has money as a medium of exchange can take part in the market. The process of exchanging money for goods or services functions as a bid-ask.
The producers of the supply can see what the consumers want and how much they are willing to pay for it. Consumers can use the knowledge of the price to plan their budgets around the pricing models. Overall, this process leads to order and predictability being established in the market.