What are the advantages of Commodity Money?

Dec 5, 2012
The most important advantage of commodity money is basically that it serves an additional purpose. For example, gold can be turned into jewelry, while cigarettes can be smoked. This gives the holder added options; he can either use or spend the money. This can also be seen as a disadvantage. If cigarettes become an informal currency in prison, for example, smoking a cigarette can become a costly activity.
Another advantage of this type of money for some people is that it may be possible to acquire money that wasn't previously in circulation. For example, if gold is used as commodity money and somebody discovers more of this metal, he or she may be able to get more value from its role as money than from its role as a base for jewelry.