Finance

How the Internet is Transforming the World of Finance

Money is a means of exchange. The value ascribed to it is more a matter of law than of value. For instance, if you’re very hungry, $50.00 can be nice to have, but only if someone has food to sell who will accept your $50.00. New versions of exchangeable products that are stand-ins for what we understand as money are cropping up all over the place, but their value is highly subjective.

Redefining What We Know As Currency

The United States went off the gold standard in 1971, to a representative form of exchange known as “fiat money.” In Latin, fiat means “let it be done.” Defining a dollar as being worth a dollar continued after 1971, but paper dollars were backed by societal agreement, not the precious metal we know as gold.

Becoming More Privatized

There was a time when rulers minted coins that featured their own images. If the emperor died, new coins would be cast and the old coins would need to be turned in, melted down, and recast to have any value in the market. Today, there are cities and communities that create a form of currency to encourage local spending. You may have a credit card that works for only one store, whether online or in person. To buy a car, you may find you can finance it through the bank run by the manufacturer. While these sources of funding can be convenient, they are highly unregulated. Lending and trading money is lucrative. There are many companies that are breaking into finances, with more popping up every year.

Pay Attention to the Basics

It can be very tempting to invest in the many newly created forms of money, and for many, it has been quite lucrative. However, these means of exchange are extremely volatile and a boom and bust cycle puts your money at risk. While there is nothing wrong with studying these new and admittedly exciting forms of investing, potential investors would be wise to apply the old rules of investing. Don’t risk what you can’t afford. Diversify to protect against huge losses. Most importantly, make sure your basic needs are covered by a stable currency and only invest what you are willing to lose. The internet has changed a great many things. Citizens of the developed world have the option to be connected across the globe. It’s also changing how people conduct financial transactions and there will likely be many more big changes to come.

Did you find this article informative? Here are some other finance articles we recommend: