What are the attributes of a good store of value

Table of Contents

When the reserves of value compete with each other, it is particular attributes that make that a new store of value can come to compete with another, first at the margin, then with a demand which will increase with the weather. While many goods have been used as stores of value or “proto-currency,” certain characteristics ultimately emerge as being particularly in demand and causing the goods respecting them to surpass their other competitors. An ideal store of value should be:

Durable: The asset must not be perishable or easily destroyed. So, for example, wheat is not an ideal store of value.
Portable: The goods must be easy to transport and store, they must be able to be protected against loss or theft, and must facilitate trade even over long distances. In this respect, a cow is genuinely less suitable than a gold bracelet as a store of value.

Fungible: A copy (or specimen) of the good in question must be interchangeable with another of the same quality and quantity. Without fungibility, the initial problem of the double coincidence of interests remains unsolved. So gold is better than diamonds, which are irregular in shape, size, and quality.
Verifiable: The property must be easily identifiable and must be able to be verified as authentic. Each previous verification then increases the confidence of its next recipient in the exchange, and at the same time increases the probability that the transaction will be concluded.

Divisible: The property must be easy to subdivide. While this attribute was less critical in primitive societies where trade was not widespread, it became more important as world trade flourished. The quantities traded became smaller and more precisely measured.
Rare: As Nick Szabo defined it, a monetary asset must have a “cost related to its improbable falsification.” In other words, the good should not be available in abundance, nor easy to obtain or produce in quantity. Rarity is perhaps the most crucial attribute that defines a store of value, as it resonates with Man’s innate desire to collect what is rare. It is the source of the original value of any store of value.

Established history: The longer the good has already been perceived as of specific value by a company, the more likely this goodwill has to appear to this company as a store of value. A store of value established as a long-recognized standard will be difficult to disrupt by a new challenger, except for a massive conquering force or if the challenger in question has a significant advantage given the other attributes that we list here.

Resisting Censorship: Resistance to all forms of censorship is a new attribute that has started to become increasingly important in our modern digital society, with invasive but low-noise surveillance at all times. It can be defined as follows: how difficult can it be for a third party (such as a business or a state) to prevent the owner of the property in question from keeping it or using it? Goods that are resistant to censorship are ideal for those living under the yoke of regimes that try to impose strict capital controls or to declare various forms of peaceful trade illegal.

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Disclaimer: The information provided on this blog is for informational purposes only and should not be taken as any form of advice.

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