Money has come a long way and as cryptocurrency enthusiasts, it is important to understand the history of money. Understanding the history of money will help you to understand why crypto is becoming more popular and its adoption as a form of currency. The article narrows down to six forms, barter trade, shell money, metal coins, paper money, digitized money, and cryptocurrency.
1. Barter Trade
Even though the International Monetary Fund (IMF's) definition of money is exclusive of barter trade, it is still an early form of currency. Barter trade was commonly used in the pre-currency period to exchange goods and services. It is still a common method today among people owing each other favors, students, colleagues at work, friends, and even family. Grain and metal were the most common forms of tradable assets. Each could have the potential to become a medium of trade, but grain had a low shelf life and metal was heavy.
2. Shells (Shell Money)
At around 1000 -2000 BC, people along coastal areas began using cowry shells for trade. Cowry shells are aesthetic in value and appealing to the eye, hence valuable. However, contrary to popular belief of Arab introducing cowry shells as a form of currency, it is China that actually did.
Arabs lived along coastal regions, and had no value for the shells. China, however, was very far from cowry shells harvesting fields. China also had a large empire and needed a mode of transaction across a wide geographical region. Therefore, the Chinese Emperors, by controlling the flow of cowry shells, were able to control inflation.
As the Chinese used cowry shells, which Arabs later on introduced to coastal regions as a means of trade, India and America used Wampum. Wampum is a string of small cylindrical beads made out of quahog shells. Clams and oyster shells were a common form of currency.
Note: Shells were the longest used form of currency. Arabs and Africans used it for trade even up to the 1950s.
3. Metal Coins
European tools and colonization changed everything. Cowry shells were no match for the stable all weather metal coins. Turkey was the first nation to use coins. In the fifth and sixth centuries, an empire called the Lydian Empire in the Iron Age introduced the first metal coins. The coins were for ornamental purposes but were later on used as currency.
Coin adoption spread to nations such as India, Greece, China, and Persia, which saw coin modification over time. Electrum, a mixture of silver and gold, was the common material for metal coins. Other metals that empires slowly adopted over time include silver, bronze, gold, and copper.
The metal coins were of value; therefore, they were by no means an automatic form of currency. Persia had gold in abundance, a commodity which was scarce in other empires. Therefore, silver was more common.
Storage of gold gave time to paper money eventually, because gold became a very rare commodity that banks stored for its people in safes. However, gold has not lost its complete value. Modern day institutions that still produce official gold coins include:
1. South African Krugerrand.
2. Canadian Maple Leaf.
3. American Eagle.
Limitations of metal coins :
Metal coins are bulky for large transaction; they are heavy.
Metal coins are easy to steal. Bandits used to have it very easy, especially in the wilderness.
4. Paper Money
Well, here we see China again. The invention of paper led to paper money. While storing gold and precious metals, banks issued promissory paper notes to its customers as collateral. However, China went into inflation because of printing a large number of notes. Nations discarded its use thereafter.
500-600 years later, other nations began to reconsider the adoption of paper money. Europe began issuing promissory notes for its gold and silver. The first set of notes were credited to the Swedish Bank, which later collapsed due to excessive printing of the notes. The bank collapsed and the Swedish Government banned the use of paper money until the 18th century.
Later on Sweden established a bank called "Risksbank" that had regulations over paper money. However, the bank did not issue new notes until 100 years later. Following this gap, financial institutions in other countries attempted to fill the gap and modernize paper money.
The bank of England took to producing paper money, but counterfeiting became the norm from other banks. Therefore, Europe introduced the Bank Charter that made the Bank of England later introduce standardized bank notes.
The USA printed its first bank notes in 1862 and accepted it as a legal tender.
5. Digitized Money
Following the explosion of the internet, smart minds began to invent credit cards and online transaction systems. Elon Musk was among these geniuses, creating X.com which later on became PayPal.
Types of Digitized Money
Digitized money has evolved with time. I will share an article on that soon. For now here are the different forms.
1. Electronic Charge Cards- American Express, Diner's Club, and Carte Blanche.
2. Charge and Credit Cards.
3. ATMs, which started in Europe.
4. Debit Cards -Combined the concept of charge and credit cards.
5. E-payment systems- X.com/PayPal, Square and Venmo.
6. Cryptocurrency
Cryptocurrency began in 2008 following the invention of Bitcoin by an unknown individual by the name of Satoshi Nakamoto. The peer-to-peer, secure and no intermediary mode of transaction gained popularity and is now gaining adoption globally.
Closing Thoughts
The economy is changing and the global pandemic reset everything. Adopting cryptocurrency early is wise. It is the next form of currency. Cryptocurrency is the future, buy and stake.
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