What is Money, Really?
Around the Block | April 13, 2026 — By William Sanchez Jr., Founder of A.W. Block
What Is Money? A First Principles Definition
Most people have never been asked to define money.
They can describe what it does — you use it to buy things, you earn it from work, you save it for the future. But a precise definition of what money actually is proves surprisingly difficult when you try to articulate it. This is not a trivial gap. The mental model most people carry about money is the source of a systematic blind spot — one that costs them real wealth over the course of a lifetime.
The confusion starts early. Economics education presents money as a given, a neutral instrument of exchange, something the system provides and individuals use. The deeper question — what makes a good form of money, and who controls it, and to whose benefit — is rarely asked. Understanding the answer to that question is the foundation of everything that follows in this series.
The Textbook Definition Falls Short
Every economics textbook defines money by its three functions: medium of exchange, unit of account, and store of value.
As a medium of exchange, money replaces barter. Without it, every transaction would require a “double coincidence of wants” — you need someone who has exactly what you want and wants exactly what you have. In a market with a thousand distinct goods, you’d need nearly half a million bilateral exchange rates to operate. Money collapses all of that complexity into one common denominator.
As a unit of account, money gives every good and service a common price. Without it, economic calculation is nearly impossible. Businesses cannot determine profit and loss, compare costs across projects, or plan investments. With it, an entire economy can coordinate through the price signal.
As a store of value, money allows you to defer consumption. You work today, earn money, and spend it next month, next year, or in thirty years. This temporal bridge — the ability to store the value of your labor across time — is arguably money’s most important function. It is also the one most vulnerable to abuse.
These three functions tell you what money does. They do not tell you what makes money good, or what properties a monetary good must have to perform these functions reliably. That requires a different framework.
Carl Menger and the Science of Salability
Carl Menger, the Austrian economist who founded marginal analysis in the 1870s, identified the core property that causes a commodity to emerge as money on a free market: salability. Menger defined salability as the ease with which a good can be sold whenever its holder desires, with the least loss in price.
This was a profound insight. Money does not emerge from government decree or social contract. It emerges from the market as individuals repeatedly select the most salable commodity as an intermediate good in trade. Over time, the most salable goods become universally accepted, and money is born.
The implication: the question of whether a given monetary good is sound is not a matter of political authority or social convention. It is a matter of physics and economics. Does the good maintain its value reliably? Can it be transacted without friction? These are objective properties that can be evaluated.
The Three Dimensions of Salability
Menger’s student Ludwig von Mises and later Saifedean Ammous, in The Bitcoin Standard, articulated salability across three distinct dimensions.
Salability across scales: can the monetary good be divided into smaller units for small transactions and recombined for large ones? Gold can be alloyed and assayed at any scale. Cattle cannot be divided without destruction. This dimension favors metals over livestock.
Salability across space: can the good be transported to wherever it is needed, at reasonable cost? This dimension favors dense, portable goods. A ship full of grain is hard to transport compared to a handful of gold coins of equal value. This dimension drove the transition from commodity to metal money.
Salability across time: will the good hold its value into the future? This is the critical dimension, and it has two requirements. First, the good must be physically durable — resistant to rot, corrosion, and deterioration. Second, its supply must not be easily increased. This is the dimension that eliminated every monetary good before gold. Shells worked as money until Europeans could import them in bulk. Glass beads worked in West Africa until European traders flooded the market. Salt worked until salt production industrialized. Every time a technology emerged that made a monetary good cheaper to produce, that good lost its monetary role and the savings of those who held it were destroyed.
Stock-to-Flow: The Key Metric
Ammous captures the salability-across-time property in a single ratio that is now widely used in monetary analysis: stock-to-flow.
Stock is the total existing supply of the good — everything accumulated and held across all of human history. Flow is the annual new production. The stock-to-flow ratio is simply stock divided by flow. A ratio of 58, for example, means it would take 58 years of current production to equal the existing supply.
The higher the stock-to-flow ratio, the more resistant the good is to supply dilution. If a sudden price spike attracts new producers, a high-stock-to-flow good barely registers the new supply against the mountain of existing stock. A low-stock-to-flow good can be flooded quickly.
Gold’s stock-to-flow ratio sits at approximately 58. Annual gold production has never exceeded 2% of existing stock in recorded history. Even a 35% price spike in 2006 resulted in no meaningful increase in mining output the following year — the geology simply doesn’t respond to price signals the way ordinary commodities do. This is why gold became the global monetary standard while silver, copper, and every other metal remained industrial goods: gold’s annual supply growth is structurally resistant to price incentives in a way no other commodity has matched.
Bitcoin’s stock-to-flow ratio already exceeds gold’s. And it will continue rising indefinitely, because the supply schedule is mathematically fixed by code. No price spike, no technological advance, no institutional decision can change it.
Money as Stored Energy
Michael Saylor and Robert Breedlove push the definition of money further, and their framework clarifies what is actually at stake when we talk about monetary quality.
Their starting point: every product and service in the economy required energy to produce. Food is transformed sunlight, water, and labor. Buildings are assembled energy. Software is organized computation. All human production is a transformation of energy. Work — the directed application of human time, attention, and intelligence — is the mechanism by which we convert energy into useful forms.
The problem: energy cannot easily be stored across time. Food rots. Fuel burns. The work you did last Tuesday cannot be stockpiled and retrieved next spring. This creates civilization’s core coordination problem: how do you save the value of today’s work for future use? How do you build things that take decades to complete?
The answer is money. Saylor’s formulation is precise: “Money is the highest form of energy that human beings can channel.” It stores the claim on future goods and services that your current work has earned. The quality of your money — its soundness — determines how much of that claim survives the journey from earning to spending.
Breedlove calls money “meta-energy.” It doesn’t store energy directly; it stores the value of energy. A good monetary system is a low-leakage vessel for human time and effort. A bad monetary system leaks. Inflation — the silent drain on the purchasing power of saved money — is the leakage. Each percentage point of inflation is a percentage of your life’s work being transferred to someone else — specifically, to whoever receives the newly created money first.
Why This Framework Points to Bitcoin
When you understand money as a protocol for storing and transmitting the value of human energy, Bitcoin’s design becomes legible in a way that pure investment analysis cannot provide.
Bitcoin was engineered with a fixed supply of 21 million coins and a declining issuance schedule that will eventually reach zero. Its stock-to-flow ratio will continue rising until it reaches infinity. For the first time in human history, a monetary good exists that cannot be inflated by any party under any circumstance — not a central bank, not a government, not its developers.
More importantly, Saylor’s engineering observation: every prior commodity money channeled human ingenuity toward finding and producing more of the commodity, which is exactly the wrong direction for a store of value. Bitcoin channels mining energy toward securing the network, not increasing supply. More mining means more security. Supply is fixed regardless.
This is not an incremental improvement on prior monetary goods. It is a categorical change in the physics of money storage. Understanding this distinction is what separates a sophisticated view of Bitcoin from a speculative one.
This series will build on this foundation, month by month, until the full picture is clear.
Sources: The Bitcoin Standard Ch. 1 | What Has Government Done to Our Money | Broken Money Ch. 1-3 | Saylor Series Episodes 4-5
“Bitcoin is perhaps the first scarce thing in the world we can say we truly possess." — Jimmy Song
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A.W. Block is a digital asset estate investigation and Bitcoin advisory firm. On the estate side, we support attorneys, probate administrators, and fiduciaries with asset identification, blockchain investigation, and court-ready documentation. On the advisory side, we work with individuals and institutions on Bitcoin custody, accumulation strategy, and education.
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