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Unit of Account Meaning

The unit of account function of money provides a consistent way to measure and compare the value of different goods, services, and assets. By denominating prices in a common unit-such as dollars, euros, or satoshis-economic agents can easily understand relative value and conduct transactions efficiently.

In traditional finance, fiat currencies serve as units of account because they are widely accepted and stable over time. In the cryptocurrency space, stablecoins like USDT or DAI are often used as units of account to mitigate the volatility of native tokens.

Some protocols denominate fees or rewards in their native token, making that token a unit of account within the ecosystem.

A reliable unit of account facilitates accounting, taxation, and financial reporting; when value fluctuates rapidly, as with many cryptocurrencies, it becomes difficult to use them for this purpose.

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