Store of Value
Store of Value Key Points
- A store of value is an asset, principle, or commodity that can be saved, retrieved, and exchanged in the future without depreciating.
- In the context of cryptocurrencies, Bitcoin is often cited as a prominent store of value.
- It is one of the key functions of money along with being a medium of exchange and unit of account.
- An ideal store of value maintains its purchasing power over time and does not degrade or depreciate.
- Gold, real estate, and certain cryptocurrencies are often considered as stores of value.
Store of Value Definition
A store of value is a concept in economics that refers to an asset or commodity that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved. This asset or commodity should ideally maintain its value over time without depreciating, allowing it to serve as a reliable means of wealth preservation across time.
What is a Store of Value?
A store of value refers to any asset, commodity, or form of money that retains its purchasing power into the future.
It is a key characteristic of money, alongside being a medium of exchange and a unit of account.
The most common store of value in the world is money, which is designed to maintain its value over time.
Other examples can include commodities like gold, or even digital assets like cryptocurrencies.
Who Uses a Store of Value?
A store of value is used by individuals, businesses, and governments.
Individuals use a store of value to save for future needs or wants.
Businesses use it to maintain their wealth over time, often in the form of investments that are expected to maintain or increase in value.
Governments use a store of value to manage their countries’ wealth and economy, and to secure their financial stability.
When is a Store of Value Used?
A store of value is used whenever someone wishes to preserve their wealth for future use.
This could be for long-term goals such as retirement, or short-term goals such as a large purchase.
It is also used in times of economic uncertainty, when people might move their wealth into assets perceived as safer stores of value.
Where is a Store of Value Used?
A store of value is used globally, in every economic system.
It is a fundamental concept in economics and finance, and is present in some form in every society, from the most primitive to the most advanced.
Why is a Store of Value Important?
A store of value is important because it allows for the preservation of wealth over time.
It provides a measure of predictability and stability in an economy, allowing individuals and businesses to plan for the future.
In the context of cryptocurrencies, a store of value is crucial in establishing their legitimacy and utility in the financial ecosystem.
How Does a Store of Value Work?
A store of value works by maintaining its value over time, allowing it to be exchanged in the future for goods or services of equal value.
This can be due to inherent properties of the store of value, such as the intrinsic value of gold, or due to a societal agreement to recognize it as such, as with fiat currency.
In the context of cryptocurrencies, this is achieved through scarcity (limited supply) and utility (usefulness).