The following are properties which make a commodity a good choice to serve as money:
i. Money should be portable
ii. Money should be divisible
iii. Money should be durable
iv. Money should be of recognizable value
Portability
For ease of use in transactions, money should be portable. The easier it is to carry around, the more effective it is as a medium of exchange. Thus, commodity money should generally be a substance that is valuable in small quantities. This explains why early humankind quickly turns to gold and silver and no lead as form of money.
Divisibility
To permit transaction of various sizes, money should be made of a commodity that is divisible into smaller units to facilitate making “change”. Gold and silver also serve well in the respect, since small coins can be minted to facilitate small transactions.
Durability
Money should be durable, i.e. it should not wear out in use and should not depreciate quickly when not in use. Gold and silver also meet this criterion.
Recognizable value/ It must be widely accepted
Money should have easily recognizable value, i.e. it should be easy for people engaged in exchange to agree to the value of the good used as money. Part of the motivation for coining gold was to provide this property. In the days of gold coins were stamped with a face value equal to the value in weight of the gold they contained. In addition, each coin was stamped with the seal of the government or the face of the king as a guarantee of the coin’s authenticity and weight. This practice made it difficult for unscrupulous individuals to snip/slice off portions of gold or manufacture “counterfeit” money. It also reduced the uncertainly regarding whether a particular coin was indeed worth the value stated by the individual wishing to exchange it, thus increasing the acceptability of gold coins as payment.
Recognizable value
It must be widely accepted Money should have easily recognizable value, i.e. it should be easy for people engaged in exchange to agree to the value of the good used as money. Part of the motivation for coining gold was to provide this property. In the days of gold coins were stamped with a face value equal to the value in weight of the gold they contained. In addition, each coin was stamped with the seal of the government or the face of the king as a guarantee of the coin’s authenticity and weight. This practice made it difficult for unscrupulous individuals to snip/slice off portions of gold or manufacture “counterfeit” money. It also reduced the uncertainly regarding whether a particular coin was indeed worth the value stated by the individual wishing to exchange it, thus increasing the acceptability of gold coins as payment.
