## Key Points

### 1. **The Circularity Problem**
– Money’s value today stems from its **purchasing power**.
– This value must have an origin, as current purchasing power depends on **past purchasing power**.

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### 2. **Historical Basis**
– Money originally functioned as a **commodity with intrinsic value** (e.g., gold, silver).
– Its **non-monetary utility** (e.g., gold for jewelry) established its value before it became widely used as a **medium of exchange**.

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### 3. **The Regression Explained**
– **Today’s value** → **Yesterday’s purchasing power** → **Historical commodity utility**.
– This regression traces the value of money to its **pre-monetary state** as a useful commodity.

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### 4. **Fiat Money**
– Fiat currency (e.g., paper money) derives value from **trust and government mandate**.
– However, its value ultimately traces back to **commodity money** historically tied to it (e.g., the gold standard).

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### 5. **Cryptocurrencies**
– Cryptocurrencies challenge the theorem as they lack **intrinsic value** in the traditional sense.
– Their value stems from:
– **Utility**: Facilitating transactions, decentralized systems.
– **Societal Trust**: Blockchain technology’s transparency and security.

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## Relevance to the Question: *What’s the Difference Between Crypto and DeFi?*
Mises’ Regression Theorem provides insight into how currency systems derive their value:

1. **Cryptocurrencies**:
– Unlike traditional money, cryptocurrencies lack historical ties to commodity value.
– They gain legitimacy through **adoption, trust**, and **practical utility**.

2. **DeFi**:
– Decentralized Finance (DeFi) challenges traditional systems by leveraging cryptocurrencies.
– This raises questions about how these new financial systems **derive and maintain value** without a historical basis tied to commodities.

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## Tags
#Economics #Money #Crypto #DeFi #AustrianEconomics #MonetaryTheory