Medium of exchange

In economics, a medium of exchange is any item that is widely accepted in exchange for goods and services. In modern economies, the most commonly used medium of exchange is currency. Most forms of money function as media of exchange, including commodity money, representative money, cryptocurrency, and most commonly fiat money. Representative and fiat money exist in digital form as well as physical tokens, for example coins and notes.

Economists, such as William Stanley Jevons, had assumed that exchange media would have arisen in antiquity as awareness grew of the limitations of barter. The form of the medium of exchange follows that of a token, which has been further refined as money. A medium of exchange is one of the functions of money. The medium acts as an intermediary instrument, the use of which 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. However, there is little evidence of a pre-monetary society in which barter is the primary mode of exchange; instead, such societies operated largely along the principles of gift economy and debt.