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Medium of exchange Meaning

One of the three fundamental pillars of money. For something to be a medium of exchange, it must be an instrument that is widely accepted to facilitate the trade of goods or services.

It is the lubricant of the economy. Historically, gold was a great store of value but a poor medium of exchange because it was heavy and hard to divide.

In the digital age, the challenge for cryptocurrencies is volatility. If a price swings 10% in a day, a merchant might be hesitant to accept it as a medium of exchange for a cup of coffee.

This is why stablecoins have become the dominant medium of exchange in the crypto-economy.

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