Token Money

Token money is a form of money which represents a greater value than its intrinsic value.

Originally medium of exchange involved metals with intrinsic value – such as gold coins. However, it became inconvenient to carry around sufficient gold. Therefore banks began issuing token money – notes and coins which they promised could be converted into gold.

If people have faith in the notes and coins, others will accept them as a form of payment.

Token money is related to the concept of fiat money – money which derives its value from government regulation or law.


In a period of hyperinflation, paper money becomes useless because it has become devalued by the government printing too much. In this example, children are playing with blocks of paper money, showing that it is practically useless.


Bitcoin are electronic accounts of value held on computers. They are valuable when there is a willingness for people to accept them. The electronic accounts have no instrinic value themselves.

Gold coins


The opposite of token money is money which has an intrinsic value. Gold coins hold their value because the metal is precious. These are not dependent on having faith in the currency and will universally have value through time and region.



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