What is Money?


Tom Corley boats - crop

When you think of wealth, what comes to mind?

Over the course of 5 years I interviewed 233 millionaires in order to better understand wealth – specifically, what it is and how it’s made.

What is inescapable, is that when ordinary people think about wealth, they automatically think about money. Any discussion about wealth, therefore, leads to a discussion about money.

So, if wealth and money are interchangeable, what then is money? 

Contrary to what you may believe, money is not merely a currency, like the dollar bill. There are three characteristics of money:

  1. Unit of Account
  2. Medium of Exchange and
  3. Store of Value

At its core, money is a token or symbol built on trust, that facilitates an exchange of one’s products or services for that token or symbol. Historically, that trust has been forged by virtue of the backing of government entities.

Enter The Bank of England

As the world population grew and trade expanded, trade, via barter, became too complicated. A better, more efficient system was needed, in order for world trade to continue to grow.

Initially, letters of credit, backed by certain financial institutions, functioned as a form of currency. But, not everyone qualified for those letters of credit.

In 1694, in order to help England build a fleet of boats as a counterweight to France’s dominance of the seas, King William III backed the creation of the Bank of England (BOE).

BOE was a privately-owned enterprise. It lent $1.2 million to the King so he could build his fleet of boats.

BOE created paper banknotes against that debt and then issued those banknotes to the public and merchants in exchange for gold, valuables, letters of credit, etc. What gave those $1.2 million in banknotes real value, was the fact that the King agreed to accept the banknotes in payment of taxes.

BOE had, in effect, been given a license to print money that was backed by England (the government/Crown). This newly created form of paper money, endorsed by the government/Crown of England, also permitted, for the first time in history, fractional-reserve banking and, with that, the dawn of modern banking was born.

Fractional-reserve banking allows a bank to hold, in reserve. a small percentage of currency to meet the demands of its depositors, who in effect, are lending their money to the bank.

For example, if Tom Corley and 1,000 other depositors deposited $1 million into Bank XYZ (lent $1 million to Bank XYZ), under the fractional-reserve system, Bank XYZ would only be required to keep, say $75,000, in currency (reserve) in order to meet the future withdrawal demands of Tom Corley or any of its other 1,000 depositors. It could then lend out $925,000 ($1 million less $75,000 held in reserve by the bank).

This system ushered in an explosion in world trade and helped fund the Industrial Revolution. It completely changed the way the world did business.

Enter Bitcoin – A New Form of Money

During the throes of the 2008 financial crisis, Bitcoin was born. That financial crisis took down the global financial system. The flow of money came to a standstill.

The libertarian cryptocurrency underground took notice. And their response to the world’s flawed centralized financial system, was Bitcoin.

Bitcoin runs over a network of computers that belong to many people, spread out across the globe, who are collectively charged with maintaining and validating its ledger of accounts.

No government, no banks, no financial institutions, no middlemen. Just like-minded people with computers, Gorrilla-glued together with a common purpose – to create a financial system that was independent and decentralized.

The mechanism for validating that ledger is something called Blockchain.

Blockchain is encrypted software, or an algorithm. Thousands of individual computer systems must all validate each transaction that occurs on the Bitcoin Blockchain ledger. Because that validation process is foolproof, meaning always 100% accurate, it has slowly built trust for those who use it.

This trust in Bitcoin represents a counterweight to the need for traditional currencies backed or guaranteed by a government entity and run by a complex labyrinth of financial partners that, together, represent the global financial system.

Slowly, Bitcoin has become a new token or symbol built on trust to facilitate an exchange of one’s products or services for that token or symbol.

In other words, Bitcoin has become a form or currency, or, if you like, money.

If that trust continues to grow, so too will Bitcoin and other cryptocurrencies using Blockchain’s trust-building algorithm.

And, if that happens, the world’s financial system, as we know it, will drastically change. Money, will no longer be the sole province of individual governments and the centralized financial system supporting it.

Bitcoin is changing our perception of money because it is changing the very nature of money.

It may be the most important technological advancement since the birth of the Internet. If Bitcoin, or some other cryptocurrency is embraced by the citizens of the world, it could force governments to intervene in order to preserve the current government-backed financial system.


Full Disclosure – Thank you Paul Vigna and Michael Casey for writing your amazing book on Cryptocurrency. I found it invaluable and very informative, particularly for this article. Here’s a link to the book: The Age of Cryptocurrency

My mission is to share my unique research in order to help others realize their dreams and achieve their goals. If you find value in these articles, please share them with your inner circle and encourage them to Subscribe. Thank You!

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Thomas C. Corley About Thomas C. Corley

Tom Corley is a bestselling author, speaker, and media contributor for Business Insider, CNBC and a few other national media outlets.

His Rich Habits research has been read, viewed or heard by over 50 million people in 25 countries around the world.

Besides being an author, Tom is also a CPA, CFP, holds a master’s degree in taxation and is President of Cerefice and Company, a CPA firm in New Jersey.
Phone Number: 732-382-3800 Ext. 103.
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  1. Since there is no oversight bitcoin is very popular with drug dealers and human trafficers. I think I’ll wait until it has a bit more regulation.

  2. Wanda Rosseland says:

    My sister was telling me about this a while ago. “It all runs on computers!” She gushed. Reason enough for me to throw it out the window. There are governments/countries right now who will shut down computers in a minute if they want to. We may think our electricity is stable, but in actuality it is dependent on everything working. Whether it is dollar bills or gold coins I would rather be able to have money in my hand than somewhere in the air.

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