Currencies vs Commodities vs Stocks

Continuing the discussion from Post of the Month:

Great question!

A currency is typically used as a store of value or to facilitate trade, while a commodity often has some other underlying use.

Modern currencies are usually issued by a government who controls the supply. We call these fiat currencies, and they include every standard modern currency you’d think of. Historically a variety of commodities might also have been used as currency - anything from gold and silver to cocoa beans and salt! If it was durable, valuable, was hard to fake, had a stable supply (nobody’s going to flood the market by surprise) and was easy to apportion, it’s liable to have gotten used as a currency.

Gold was a currency and a great store of value because it had all these qualities. It was especially good on the durability scale - gold doesn’t ever rust or degrade.

A cryptocurrency like Bitcoin or Bitcoin Gold also has these qualities, and like gold, a digital currency doesn’t ever rust or degrade. Bitcoin Gold is even easier to apportion than real gold (think about how to make change for a nugget of gold), and can be transmitted globally through the internet (don’t think about doing that with a nugget of gold!)

Because Bitcoin Gold isn’t backed by a government - it isn’t a currency by fiat - it can be argued to be more like a digital commodity. But it’s a commodity that’s definitely used as a currency.

That’s right; a cryptocurrency doesn’t denote partial ownership of a company or other entity, as a stock does. However, there is a crypto-token analog to that: the ICO, or Initial Coin Offering, is an offering of tokens that do represent ownership of an entity, very much like a traditional stock. Regulators have generally ruled that such tokens do, in fact, qualify as securities offerings, the same as stocks.

There’s on more category you haven’t mentioned: utility tokens. These are crypto-tokens which are usable in some sort of ecosystem for some specific purpose. One real-world analog might be laundry tokens; they exist so that you can use them to run your laundry, but once you have them, you’re able to hang on to them for their value, to trade them to someone else, etc. FileCoin is one example of this in the crypto space - imagine a model where you can buy file storage space with FileCoin, or you can provide file storage space to earn FileCoin. Or, if you have some, you can trade them with others, or use them as currency.


There are real-world equivalents to each aspect of cryptocurrencies, but there’s no perfect equivalent for cryptos in all regards. They are truly new technology and represent the first fundamental shift in the very nature of money in a long, long time.