Money is a good acquired not for its own use or consumption, but to be later exchanged for other goods and services. This definition, from Saifedean Ammous, highlights that money's value stems from its exchangeability.

A monetary good acquires a monetary premium when a demand exists for it to serve one or more of money's functions.

For this premium to persist, the good must be sufficiently scarce; otherwise, its supply would increase to meet the monetary demand, eroding the premium.

This section examines Saifedean Ammous's definition of money from The Bitcoin Standard and expands upon it with the concept of monetary premium, a concept that is necessarily tied to scarcity.

To this definition, it can be added that a monetary good acquires a monetary premium when there is a demand for it to fulfill one or more of money's roles. For instance, a good that serves as a store of value will have a monetary demand that gives it a monetary premium, as people acquire it specifically for that function or as a medium of exchange.

For a monetary premium to persist, the monetary good must be sufficiently scarce. This is critical because standard market mechanisms typically erode such premiums. For most goods, price increases incentivize producers to increase supply to capture the gains. Conversely, price decreases lead to reduced production. This supply-response mechanism keeps prices relatively stable by adjusting to demand. However, for a sufficiently scarce good like gold, this market mechanism is ineffective. The supply cannot be readily increased to meet rising monetary demand, so the variable that adjusts is the price. Bitcoin operates on the same principle. When demand for bitcoin increases, its price rises because the supply of new bitcoins is fixed by a pre-programmed algorithm and cannot be altered in response to market signals. This predictable and unchangeable supply ensures that the monetary good is rare enough for its monetary premium to persist without being undermined by production adjustments.