Representative and fiat money most widely exist in digital form as well as physical tokens, for example coins and notes.
The origin of "mediums of exchange" in human societies is assumed by economists, such as William Stanley Jevons, to have arisen in antiquity as awareness grew of the limitations of barter.
[2][3][4] The exchange acts as an intermediary instrument as the use can be to acquire any good or service and avoids the limitations of barter; where what one wants has to be matched with what the other has to offer.
[8][9][10] In his book Debt: The First 5,000 Years, anthropologist David Graeber argues against the suggestion that money was invented to replace barter.
His research indicates that gift economies were common, at least at the beginnings of the first agrarian societies, when humans used elaborate credit systems.
[14] Anthropologist Caroline Humphrey examines the available ethnographic data and concludes that "No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money; all available ethnography suggests that there never has been such a thing".
A medium of exchange removes that requirement, allowing an individual to sell and buy from various parties via an intermediary instrument.
The most important and essential function of a medium of exchange is to be widely acceptable and have relatively stable purchasing power (real value).
Increasing free-floating money supply with respect to needs of the economy reduces the quantity of the basket of the goods and services.
It is not a unit or standard measure of wealth and so the manipulation impedes the market mechanism by setting or determining just prices.
[22][23] On the other hand, Chartalists claim that the ability to manipulate the value of fiat money is an advantage, in that fiscal stimulus is more easily available in times of economic crisis.
A common explanation is that people will always keep the less adultered, less clipped, less filed, less trimmed coin, and offer the other in the marketplace for the full units for which it is marked.
Other functions rely not on recognition of some token or weight of metal in a marketplace, where time to detect any counterfeit is limited and benefits for successful passing-off are high, but on more stable long term social contracts: one cannot easily force a whole society to accept a different standard of deferred payment, require even small groups of people to uphold a floor price for a store of value, still less to re-price everything and rewrite all accounts to a unit of account (the most stable function).
This practice became less common as it was exploited by forgers and led to a domino effect of bounced checks – a forerunner of the kind of fragility that electronic systems would eventually bring.
In the age of electronic money it was, and remains, common to use very long strings of difficult-to-reproduce numbers, generated by encryption methods, to authenticate transactions and commitments as having come from trusted parties.