What Is Currency?
Currency is a medium of exchange used to facilitate the transfer of goods and services. It can be in physical form, such as coins or paper money, or it can exist digitally, such as electronic funds transfers. Currency serves several important functions in an economy: it allows for the efficient allocation of resources by providing a unit of account; it acts as a store of value that people can use to save their wealth; and finally, currency provides liquidity so that people can easily buy and sell goods without having to barter.
The most common type of currency today is fiat money, which has no intrinsic value but is accepted by governments as legal tender. Fiat currencies are typically issued by central banks and backed up with reserves held at other financial institutions. Other forms of currency include commodity-backed money (such as gold) and virtual currencies (like Bitcoin). Each type has its own advantages and disadvantages depending on how they are used within an economy. Ultimately though, all types serve the same purpose – allowing individuals to purchase goods and services more efficiently than if they had to rely solely on bartering systems.