Glossary

Sound Money

1 min read

Sound money refers to money that maintains its value over time without suffering from significant debasement. It is reliable and stable, meaning people can trust that their purchasing power will not decrease in the future. Sound money is crucial for economic stability since it allows individuals and businesses to confidently, save, invest, and plan for long-term goals without worrying about their money losing its value to inflation.

Hard money and sound money are often used interchangeably but generally, sound money refers to the stability and reliability of a currency’s value over time. In contrast, hard money focuses on how difficult it is to produce new units of the currency.

Bitcoin is an example of sound money due to its fixed supply and decentralized nature. It is reliable, resistant to inflation, and holds its value over time.

The term "sound money" originated when historically, people used to test the gold content of coins by the sound it made when struck against another piece of metal.
The term "sound money" originated when historically, people used to test the gold content of coins by the sound it made when struck against another piece of metal.
Related Terms
Debasement
Debasement is the deliberate reduction in the value of a money. For commodity money, debasement is usually achieved via a reduction in the gold or silver content of a coin. For digital or paper money, debasement can be achieved simply by creating more digital or paper money.
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Inflation
Inflation is a general increase in the price of goods and services in an economy over time. Inflation is primarily due to a constant increase in the monetary base by the local government or central bank.
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Hard Money
Hard money retains value over time, resists inflation, and has a finite supply. Examples include gold, silver, and Bitcoin, which has a cap of 21 million coins.
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