It served as a worldwide standard of value. This function was assumed by gold as a result of its attributes of portability, durability, divisibility, general desirability, stability in value, and high value in small bulk. We'll see later on that some of these features also have to be kept in mind when designing a digital money system. The choice of the money system is an act of government by legislation or decree.
Provision is made for converting any type of money into any other.
Coinage has become a state monopoly, and government further controls the money supply directly by legal-tender laws that define the moneys which a creditor must accept when offered by a debtor in settlement of a debt. It should be clear that the actual circulating media of exchange, e.g., paper money and checks, need not themselves be the standard of value, but they must be expressed in terms of the standard of value in the unit of account, whatever the government may define that to be. If an exchange between two parties is voluntary, it will not take place unless both believe they will benefit from it. Most economic fallacies derive from the neglect of this simple insight, from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another. That is, as the quotation from Adam Smith says, money is a commodity or token that everyone will accept in exchange for the things they have to sell.