Why Your Money's Value Needs a Standard Measurement System

The Hidden Power Behind Price Comparisons

Every time you compare the price of a coffee ($5) to a movie ticket ($12), you’re relying on something so fundamental that most people never think about it: a shared measurement system. The unit of account is defined as the standard denominator that allows this comparison to happen. Without it, saying “a house is worth 500,000 times more than coffee” would be meaningless.

The unit of account is defined as a common reference point through which we calculate, measure and compare the monetary value of virtually everything in the economy—from your salary to your investments to a loaf of bread. Think of it like the metric system for money. Just as meters measure distance universally, your country’s currency measures value universally within its borders.

Nationally, this role is played by official currencies: the euro in Europe, the British pound in the UK, the Chinese yuan in China. Globally, the U.S. dollar has dominated this function for decades, serving as the baseline for international trade, oil pricing and cross-border transactions. But what makes a good standard measure, and could something else eventually replace it?

What Actually Makes a Unit of Account Work?

Not every currency functions equally well as a unit of account. For something to serve this role effectively, the unit of account is defined as needing two critical properties:

Divisibility — Money must break down into smaller pieces without losing value. You can’t easily trade with something that only comes in fixed, large chunks. Bitcoin’s divisibility into satoshis (0.00000001 BTC) actually makes it theoretically superior to some government currencies in this regard.

Fungibility — Each unit must be interchangeable with every other unit of the same value. One dollar equals one dollar; one Bitcoin equals one Bitcoin (at the same time). This interchangeability is what makes accounting and transactions seamless. Without it, merchants and businesses would waste enormous energy verifying that specific coins or notes weren’t counterfeit or damaged.

Beyond these technical requirements, stability matters enormously. A unit of account that constantly shifts in value undermines its entire purpose—you can’t plan for the future or compare prices across time if the measuring stick keeps changing length.

How Inflation Quietly Destroys the Unit of Account Function

Here’s where most people’s understanding breaks down: inflation doesn’t technically eliminate the unit of account function, but it severely damages its reliability. When prices rise consistently, the same unit of currency measures less purchasing power over time.

Imagine if a meter was shortened by 2% every year without anyone noticing. You’d still be using meters as a measuring system, but your measurements would become increasingly inaccurate when comparing past and present. That’s what inflation does to money as a unit of account.

When inflation is high or unpredictable, businesses struggle to price goods fairly, workers can’t negotiate wages confidently, and savers watch their long-term financial plans dissolve. Central banks in countries like the U.S., eurozone and UK have tried to manage this through inflation targets (typically around 2%), but this still means your money loses value every single year.

Money’s Three Jobs: Unit of Account is Just One

Financial theorists recognize that money serves three distinct functions:

1. Medium of exchange — You can use it to buy things right now
2. Store of value — Your money doesn’t collapse in worth between transactions
3. Unit of account — It provides a standard for measuring and comparing value

Bitcoin, for instance, has struggled with functions 1 and 2 (transaction speed and price volatility), but it excels at function 3 if you look long-term—precisely because its supply is mathematically capped at 21 million coins forever.

Bitcoin: A Unit of Account for the Digital Age?

This is where the conversation gets interesting. The unit of account is defined as something that ideally has five characteristics: divisibility, fungibility, accepted use, stability and censorship resistance. Bitcoin has all five—but with a catch.

Traditional currencies have elastic supplies; central banks can print more dollars, euros or yuan whenever they choose. Bitcoin’s supply is completely inelastic by design. This means it cannot be devalued through monetary printing, making it theoretically immune to the inflation that has plagued fiat currencies for centuries.

The consequences would be profound if Bitcoin ever achieved global adoption as a unit of account:

Better long-term planning — Businesses and individuals could project future values with genuine confidence, not constantly recalculate accounting in real terms. A contract for $1 million in 2025 would mean roughly the same purchasing power as $1 million in 2035.

Eliminated currency risk — International trade would dramatically simplify. Imagine importing goods from Japan and exporting to Germany without worrying about yen-to-euro fluctuations. The unit of account would be global and stable, not subject to political or economic shocks in any one country.

Forced fiscal responsibility — Governments couldn’t inflate away their debt by simply printing money. This would likely lead to more prudent budgeting, though it would also eliminate monetary policy as a tool for stimulating economies. Policymakers would need to focus on productivity, innovation and investment instead of temporary stimulus measures.

Economic measurement clarity — GDP, wages, investment returns and asset values would all maintain genuine comparability across decades, not just years. Historians in 100 years wouldn’t need complex inflation calculators to understand what things actually cost today.

The Stability Dilemma: Perfection Isn’t Possible

Some economists argue that the ideal unit of account would be as stable and standardized as the metric system—a fixed, unchanging measure of value. But there’s a fundamental problem: value isn’t objective. It emerges from human preferences, scarcity, utility and context.

What coffee costs depends on weather affecting harvests, global demand, local labor costs and supply chain disruptions. A perfectly stable unit of account would be measuring something that cannot, by nature, remain perfectly stable. You could fix the money supply, but you cannot fix supply-and-demand dynamics or human preferences.

This is why even Bitcoin, for all its technical elegance, experiences significant price volatility. Bitcoin as a unit of account works brilliantly if you’re pricing things in Bitcoin and everyone uses Bitcoin—but the transition period, where Bitcoin exists alongside traditional currencies, creates uncertainty that undermines its function.

Where We Stand Today

The unit of account is defined as the measuring stick of modern economies, and this function is currently performed by government-backed currencies. These currencies are subject to inflation, political decisions and central bank policies, but they have the advantage of universal acceptance and legal backing.

Bitcoin and other cryptocurrencies represent an alternative model: a unit of account that’s truly decentralized, mathematically predictable and free from government manipulation. However, it’s far too volatile and too limited in adoption to serve this role globally—yet.

The real innovation Bitcoin offers isn’t that it’s perfect; it’s that it presents a different option. As economies continue to wrestle with inflation, currency crises and monetary policy debates, having a non-inflatable unit of account as a backup or alternative becomes increasingly valuable.

The future might not be Bitcoin exclusively, but it will likely involve competition between different measuring sticks for value—a development that would fundamentally reshape how we think about money, accounting and economic planning.