Certified Bitcoin Professional Practice Exam

Which property of money is not necessary for an asset to be used as a medium of exchange?

1. Intrinsic value

2. Government backing

3. Durability

4. Portability

The correct answer is: Government backing

The property of government backing is not necessary for an asset to function as a medium of exchange. A medium of exchange is fundamentally required to facilitate transactions. While government backing can enhance trust in a currency, it is not essential for an asset to be accepted as a medium of exchange. Historically, many forms of money have emerged and operated successfully without explicit government backing. For example, barter systems utilized goods and services directly, and in some cases, commodities such as gold or silver have been used as money based on their intrinsic qualities rather than government endorsement. Additionally, cryptocurrencies like Bitcoin operate effectively as a medium of exchange without government backing, illustrating that other factors like acceptance and network effect can establish a currency's functionality. In contrast, properties such as intrinsic value, durability, and portability speak to the practicalities involved in exchange. Intrinsic value adds a perception of worth, durability ensures that the medium can withstand physical handling, and portability allows it to be easily transported for transactions. Collectively, these attributes facilitate smoother exchanges, but government backing is not a prerequisite for an asset to serve as money.