Why money evolves to only one

[copied from my Tweet thread for you guys] ...

There is a natural force in a civilisation where people desire money that is accepted by *MOST* others. This force pushes the most accepted free-market money further ahead (ignore the multiple fiats - they are not "free-market" money, they are forced)...

I shall call this force "The Force of Parman", TFOP, why not LOL? TFOP is always there. It's a part of human nature. Exceptions can exist for individuals, but The Force of Parman averages to always be there in a group. This leads to a positive feedback loop...

... where each person has a choice to hold a unit of their wealth in one thing at-a-time only. The entire wealth can be diversified, but each unit of wealth exists in one place and a choice has to be made...

for each unit of wealth - it is best to hold in something that someone else is MOST LIKELY to accept as payment (the point of holding money instead of exchanging your time for goods directly, ie barter).

One might diversify, but that is illogical - why hold a unit of wealth that is less acceptable to others? Unless you are gambling and think that the acceptability might change in your favour. That's a different discussion but does lead to ppl perhaps dabbling in other monies...

... but the MAJORITY of their wealth is not for dabbling. Most ppl will be conservative with the majority of their wealth, and choose the safe option - the money that is most accepted. If they don't they'll become poor and irrelevant, eventually holding tokens no one wants.

So on average, with most people putting most of their wealth in the most accepted money, what happens? A positive feedback loop of the most accepted money becoming even more "the most accepted". This is better called the most "liquid" or the most "saleable".

Relentlessly, the leading free-market money, via The Force of Parman, results in a society that prefers to be paid with ONE money. Every other unit of exchange can exist in some small amount but as a gambling tool, not as a money...

By definition, money is a unit that is MOST accepted as payment within in a society. When multiple payment forms exist without a clear leader, then society is in a state of barter, not a state of money.

There can be fractured societies each with their own money, and for trade to take place between them, bartering of the money would be required. This is what happens in the world today. The world doesn't have a money, it has multiple societies each with its own fiat money.

One might argue that USD is the world money, but in my country, you can't buy things with USD. USD is the "reserve" asset. You have to exchange it for fiat, at some rate, which involves risk. That's barter...

With money in society, there isn't such an exchange risk. Money in society eliminates the risk of accepting the money; there is no exchange risk, and that's the point. It is the safest thing to accept.

When society has money, people are relieved of the risk of specialising. If you specialise your trade in a barter society, what you offer as a good might not be acceptable to others as payment...

Money solves that. It allows people specialise safely, everyone becomes more productive since they are doing what they are best at rather than being cautious and doing a variety of things on their own, and with this greater efficiency, all of society becomes more prosperous.

To read more about all this, and a description of how society evolves from barter to money, and how the economic forces work, read here...

https://armantheparman.com/onemoney/

If there's more interest about this, then you can see why Bitcoin will be the only one left standing...

https://armantheparman.com/why-bitcoin-only/