I realize Barak, under anarchy there would be no money other than gold/silver but the reality is that most people want a paper currency guaranteed by a government. I know that's stupid but its reality.
Actually, in a free society there could be all sorts of different kinds of money. Time was, I would have said gold and silver would invariably wind up as the market leaders, same as they have for thousands of years; but I spent some time recently researching Bitcoin, and now I'm not so sure.
Bitcoin is pretty freakin' amazing. It sounds a little silly when you first hear about it, but the amount of thinking--good, clear, brilliant thinking--that has gone into it is monumental. There are still a few problems with Bitcoin, the way there were still a few problems with the Model A Ford, and I think Bitcoin is a step on the way to something more useful rather than being an ultimate in itself; but it's a
big step.
If you haven't checked it out yet, you could do worse than to give it a shot. One of the problems with it, though, is that you really can't understand the genius of it unless you know a bit of cryptography, computer science, and mathematics. A popularized apologetic for it would go a long way.
But I digress.
Gold and silver are terrific at holding their value, but they're not particularly digital: you can't easily send them across a network. In the modern age, this is a severe handicap. Therefore, just as dollars have served as a commodity backing digital currencies such as PayPal, credit card transactions, Dwolla, and so on, I think in a free market gold and silver would be largely relegated to the role of backing commodity.
Different entrepreneurs would come up with different currencies backed by gold or silver (or palladium or platinum or rhodium or whatever) that aimed at different markets.
For example, one currency might be reliably accepted just about everywhere. Another might come with a heavy emphasis on individual privacy. Another might stress security. Another might be especially good at micropayments.
Of course, if you wanted to carry silver coins around in your pocket and pay for meals with them, you could undoubtedly find takers for them (heck, I've done that myself, even under a coercive legal-tender system); but the real volume, I think, will be done in digital currencies.
