Why We Need a Unit of Account: From Currency to Cryptocurrency

Every transaction you make, every asset you own, and every debt you owe gets measured through something we take for granted: a unit of account. This fundamental mechanism allows us to express value in comparable terms, making commerce, planning, and economic decision-making possible. Whether you’re comparing the price of a house to your annual salary or calculating business profits, you’re relying on a unit of account to translate different goods and services into a common language. Understanding what a unit of account is and why it matters has become increasingly important as we rethink how money functions in the modern economy.

The Foundation of Modern Commerce: Understanding Unit of Account

A unit of account serves as the common denominator through which we measure and compare the value of everything. Rather than negotiating how many chickens equal one piece of land, or how many apples trade for one pair of shoes, we use a standardized measure—money—to express value consistently.

This seemingly simple function underpins all of modern economics. When you know a car costs $30,000 and a house costs $300,000, you immediately understand the relationship between them. You can calculate whether you can afford either, how long you need to save, and what trade-offs are involved. Without a unit of account, every price comparison would require complex negotiation, making budgeting impossible and markets inefficient.

A unit of account also enables us to perform mathematical operations essential to modern life. We calculate profits and losses, track income streams, and measure net worth—all because we have a standardized way to express value numerically. This isn’t just useful for individuals; it’s foundational for banks, governments, and global trade.

How Different Economies Define Their Unit of Account

Around the world, each economy has adopted its own unit of account as a function of national sovereignty and practicality. The United States measures its economy in U.S. dollars (USD), Europe uses the euro (EUR), the United Kingdom uses the British pound (GBP), and China uses the yuan. Each nation’s unit of account reflects its economic system and helps policymakers track growth, inflation, and financial stability.

At the international level, however, the picture simplifies considerably. The U.S. dollar has become the dominant unit of account for global commerce, used for pricing commodities like oil and setting exchange rates between currencies. This dominance emerged from historical factors—America’s economic strength after World War II and the Bretton Woods system—but it provides practical benefits today. When companies conduct cross-border transactions or international investors compare opportunities, they typically convert everything into dollars for easy comparison.

This USD-centric system reveals something crucial: for a unit of account to function effectively on a global scale, it needs widespread acceptance and relative stability. The dominance of the dollar shows how a single unit of account can facilitate international trade and investment by providing a common reference point.

The Essential Properties: Divisibility and Fungibility Explained

For something to serve as an effective unit of account, it must possess specific properties. The first is divisibility. A unit of account must break down into smaller units so you can express the value of any good or service with precision. A dollar divides into cents; bitcoin divides into satoshis. Without divisibility, a unit of account becomes too rigid—imagine trying to price a coffee if the smallest denomination was $100.

The second critical property is fungibility. This means that one unit is identical to and interchangeable with another unit of the same kind. One dollar bill has exactly the same value as another dollar bill. One bitcoin carries the same value as another bitcoin. Fungibility matters because it ensures that the unit of account maintains consistent purchasing power; if some dollars or bitcoins were worth more than others, comparing prices would become meaningless.

Together, divisibility and fungibility create the stable foundation needed for a unit of account to function. They ensure that the measurement system remains consistent and reliable, allowing people to make confident financial decisions based on prices.

When Inflation Undermines Your Unit of Account

Despite being essential, the unit of account function faces a serious threat: inflation. When the general price level of goods and services rises consistently, the unit of account’s reliability deteriorates. A dollar today doesn’t measure value the same way a dollar did five years ago—goods that cost $10 then might cost $15 now.

This erosion becomes especially problematic over long time horizons. If you’re planning for retirement decades away or a business is forecasting revenues across multiple years, inflation makes the measurement unreliable. A project that looked profitable based on prices from three years ago might be unprofitable today if your unit of account has shrunk in real terms.

Inflation also distorts economic decision-making at every level. Individuals struggle to determine how much to save. Businesses question whether long-term investments make sense. Governments face pressure to stimulate economies artificially rather than solving structural problems. The unit of account, intended to clarify value, becomes increasingly cloudy as inflation rises.

This is why economists have long theorized about a unit of account that wouldn’t face inflationary pressures—one that maintained consistent measuring power across decades and centuries, much like a perfect metric system for value.

The Essential Characteristics of an Ideal Unit of Account

What makes a unit of account truly effective? Divisibility and fungibility are the basics, but an ideal unit of account would also be stable, predictable, and resistant to manipulation. It would measure value consistently across time, allowing someone in 2026 to have equal confidence in price comparisons as someone in 2126.

This kind of stability would transform economic planning. If your unit of account was as reliable as the metric system is for measuring distance, you could plan decades ahead with confidence. Businesses could commit to long-term projects. Individuals could save for retirement knowing their purchasing power wouldn’t be eroded by inflation. Governments would lose the temptation to print money to fund programs, forcing them to pursue real economic growth through innovation, productivity, and investment.

Furthermore, a stable global unit of account would reduce friction in international commerce. Currently, companies must account for currency fluctuation risks when trading across borders, adding costs and complexity. A universally accepted, stable unit of account would eliminate this drag on global trade, making cross-border transactions as simple and inexpensive as domestic ones.

Bitcoin’s Fixed Supply: A Breakthrough for Unit of Account

This is where Bitcoin enters the conversation as a potentially transformative asset. Bitcoin’s most revolutionary characteristic is its fixed, predetermined supply: exactly 21 million coins, no more. This supply cap cannot be changed by any central bank, government, or protocol vote—it’s literally hardcoded into Bitcoin’s mathematics.

This fixed supply directly addresses inflation’s threat to a unit of account. Unlike the U.S. dollar, which the Federal Reserve can print in unlimited quantities, or the euro, which the European Central Bank can expand at will, Bitcoin’s supply is inelastic. This predictability offers something novel: a unit of account whose measuring power cannot be diluted through monetary expansion.

For individuals and businesses, this matters profoundly. When assessing whether an investment makes sense or whether a business is truly profitable, you’re not comparing against a yardstick that gets shorter every year. The measurement remains consistent. A satoshi (the smallest unit of bitcoin) represents the same fraction of the 21 million total today and in 2050. This constancy could make financial planning dramatically more reliable.

Beyond stability, Bitcoin operates as a censorship-resistant unit of account. No government can freeze Bitcoin holdings or prevent transactions. No central authority can devalue it by decree. For populations in countries with unstable currencies or oppressive financial controls, Bitcoin offers an alternative unit of account that cannot be manipulated politically.

The Case for a Stable, Global Unit of Account

Imagine a world where the unit of account for global commerce was stable, borderless, and resistant to political manipulation. International trade wouldn’t require currency exchanges or the complex hedging strategies that currently add friction and cost. A startup in Kenya could price its services in the same unit as a company in Germany, with both understanding that price unchanged.

This stability would create a more robust global economy. Instead of countries competing through currency devaluation or other monetary manipulations, they would compete through genuine productivity and innovation. The temptation to inflate away problems would disappear, encouraging more responsible fiscal and monetary policy.

Bitcoin’s potential lies in offering exactly this: a unit of account that is divisible, fungible, stable across time, and resistant to any single entity’s control. However, Bitcoin remains relatively young. Its price volatility, though declining over time, still presents challenges for its immediate adoption as a unit of account. As adoption deepens, merchants and users gain confidence in it as a measure of value, and volatility naturally decreases, Bitcoin could mature into the global unit of account that generations of economists theorized about but couldn’t realize with fiat currencies.

The transition wouldn’t happen overnight. It would require widespread adoption, regulatory clarity, and accumulated proof that Bitcoin’s fixed supply genuinely delivers the stability that inflation-prone currencies cannot. But the framework is there: a unit of account designed to measure value consistently, transparently, and without the distortions that plague monetary systems throughout history.