Sound Money is something that is not subject to sudden appreciation of depreciation. The purchasing power of the money is helped by several self-correcting mechanisms which is inherent in a free-market system.
When looking at something called money, the Central Banks “Ostensibly” manipulate the money with a motivation to stabilize the goals for the economy of the particular country. However, sometimes due to this kind of manipulation, there is a wide variation in purchasing power.
There is sometimes a negative impact created by the control of the Central Banks between the money supply and the demand for money. When there is an economic downturn, there is a change for the demand of money and there is a lack of automatic adjustment in the supply of money. The money is incompatible with the principles of “sound money.”
The stability of the purchasing power of money at hand is affected. Sound money in reality is supposed to be authentic real wealth and not the purchasing power given by the credit cards. Currency debasement in fiat currency is undesirable. For clarity, debasement means the process or the action of reducing the quality or value of something.
What is called money today is very far away from what sound money is really meant to be. There is a folly of lot of politicians and financial experts in the process. For clarity, folly means tragically foolish actions or conduct.
To make cryptocurrency work like sound money lot of work is to be done and this is why Charlie Lee, Creator of Litecoin in the past tweeted: “Fungibility is the only property of sound money that is missing from Bitcoin & Litecoin. Now that the scaling debate is behind us, the next battleground will be on fungibility and privacy. I am now focused on making Litecoin more fungible by adding Confidential Transactions.”
Fungibility brings in mutual interchangeability. The important thing to note is that from the days of the barter system – mutual interchangeability was not 100% possible, at least one of the parties in the barter got a compromised value. This is hard to change. Technically, never possible to achieve 100%; however, Litecoin have to state that they are going to achieve fungibility. No matter what they do the differences in value is here to stay and one will definitely be the loser. When everything equalizes, then the economic game play will be over. Waiting to see how fungibility and scalability are made possible by the LTC in a few years from now.