Money is any object that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally, a standard of deferred payment.
Money originated as commodity money, but nearly all contemporary money systems are based on fiat money.
Wikipedia’s definition of money is correct in the first paragraph, but there is a major problem with the second paragraph. Money did not originate as commodity money. This is a commonplace but false assumption, which will be soon explained.
The Origin of Money
There are three major theories regarding the origin of money:-
1 Money was created for trading purposes;
2 Money was created for social purposes;
3 Money was created for religious purposes.
1 Money was created for trading purposes
Most economists assume that money developed for trading purposes, because it was more flexible than bartering. This meant that money was a valuable commodity in itself, such as cattle in ancient civilisations, later gold and silver by weight, and finally coinage – gold and silver coins.
This all seems reasonable enough until you realise that it is an attempt to justify the origin of metallic money, otherwise where do cattle fit into this metallic money idea? They don’t. Furthermore metallic money would assume a high level of development: It would assume recognition of private property as opposed to tribal property: It would assume recognition of contracts and a legal system to enforce them. Whereas cattle as money is much easier to accept, because it is easy to value for a primitive society, with no legal system to arbitrarily enforce a value
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