Cryptocurrency is becoming increasingly popular each day. It is a testament to how far we have come when it comes to money and finances. The popularity of cryptocurrencies makes us wonder about the evolution of money. It makes us question where it all started and how we get to such an advanced stage of handling money.
Thinking back to the Stone Ages, thousands of years ago, when there was no form of money available, it is fascinating to reflect and realize how far we have come. Standard money did not exist back then. Our ancestors used other forms of valuable things to exchange goods and services.
- Money has cycled through many different shapes and forms in the last few thousand years. From exchanging goods to metallic money, in the form of coins, to paper money to cryptocurrencies, money has undergone its fair share of evolutionary changes. The innovation in the field of technology further brought significant changes in how we handle money and payments.
- What’s more, is that there are so many different forms of money and currencies available now instead of just one. According to the United Nations, there are a total of 179 currencies in the world.
So how did we go from something as simple as exchanging goods to producing so many different types of currencies? This blog post will discuss the evolution of money and how we ended up to where we are now.
Table of Contents
1. The Evolution of Money – The Barter Economy
The birth and evolution of money are widely speculated amongst people who are interested in the history of money and where it all started. A lot of people think that money was born as a result of the barter economy, dating back to 6000 BC.
The barter economy was one in which people used to trade goods and services with each other directly. For such a system to work, both the parties involved needed to have what the other one wanted. They could then exchange those goods and settle on what is the appropriate service in relation to a good that was exchanged.
Needless to say, the concept of a barter economy was very limiting. It did not involve money and was only limited to people who had something to offer each other as it relied solely on the exchange of goods for services.
In the barter economy system, all kinds of goods were exchanged. You could exchange everything from herbs to tea to even salt. Traders also went around the world exchanging goods with people in exchange for luxury items like silk and perfumes.
Suffice to say, the barter system was not very complicated and fulfilled the needs of people of those times. That is because, in those times, people lead simple lives.
However, as people’s demands became more complex, the barter system could not keep up with them. A new system needed to be introduced to keep up with people’s growing demands and sophisticated needs.
2. Commodity Money
Commodity money was very similar to barter. It worked under the same principle, with only one difference. As evident by the name, commodity money is money whose value is derived from a commodity from which it is made.
There was no common medium of exchange in the case of the barter system which was the very reason that it was limiting. The concept of commodity money introduced a common medium between two buyers.
Therefore, anything could be used as money as long as it served a need and was durable. Depending on the region, people used all forms of commodities, such as seashells, limestones, gold, and silver.
Moreover, banks introduced the concept of loans where people who were in need were provided with them. Unfortunately, many people took advantage of the loopholes in these loan systems in the beginning. The banks quickly took notice of this and better rules and regulations were put in place to deal with these issues. Today, we have very little to no chance of defrauding a bank.
3. Metallic Money
As society progressed, people realized that commodity money was just not cutting it. There were a few loopholes associated with commodity money. The main one was that these commodities were “perishable.” What they essentially meant was that they could not be kept for a long time and so people were not able to reuse them in the future. Besides, this was not an efficient method of trading in other regions.
In 600 B.C., money was first given a metallic form. This currency was represented by coins. To avoid fakes, coins were stamped with pictures. Each coin represented a different value. The introduction of coins made it a lot less difficult for people to assign a value to an item.
Thanks to the birth of coins, trading, and business boomed and soon every country developed and introduced its own coins.
4. Paper Money
As the history of money progressed, paper money took the place of coins. Paper money was first developed in China during the 7th century. However, it only gained mainstream traction by the 11th century. In Europe, the same paper money was first introduced by Marco Polo in the 13th century.
Paper money was used in much the same way then as it is used now. The main difference between then and now is how it was issued. Nowadays, it is issued by the government but back then it was issued by banks and private institutions in exchange for silver and gold.
5. The Creation of a Banking System
As money evolved, so did our society. Thanks to its simplicity, people began to earn more and more money. This gave rise to crimes related to money. Life was not safe anymore with money kept inside their homes.
This gave birth to the banking system. The banking system allowed people to safely store their money in a secure place. This gave them protection from theft.
6. Electronic Money (Credit and Debit Cards)
Thanks to the banking system and the evolution of technology, the world was introduced to electronic money, or what we commonly refer to as credit or debit cards. Plastic money now has many forms; for example, many companies have loyalty cards to award regular customers.
However, the card that revolutionized the way we deal with payments and money was first introduced in 1958 by American Express. They introduced a credit card that could be used universally. These cards were initially made of paper but as they gained popularity, their material was made more durable by changing it from paper to plastic.
Nowadays, we can store our credit cards on our smartphones and make purchases with the tap of a finger.
7. Cryptocurrencies
Exploring the evolutionary cycle of money brings us to the latest form of currency – cryptocurrency.
Cryptocurrencies were first introduced in 2008 by Satoshi Nakamoto. He created and mined the first block of the Bitcoin network, giving birth to the revolutionary blockchain technology.
Cryptocurrency is extremely secure owing to a decentralized system. That means that the currency has no governing body and is stored on several different databases instead of only one. As of yet, cryptocurrencies do not possess a physical value. However, more and more businesses are slowly accepting this as a digital asset and in the last year alone, cryptocurrency has exploded in popularity.
What the future has in store for cryptocurrency is yet to be seen. Here you have an article to enlighten yourself
Exploring the evolutionary cycle of money brings us to the latest form of currency - cryptocurrency.
Conclusion
As you can tell by reading the history of money, it has come a long way. The evolution of money underlies economic and technological advances and developments. Human beings have come from exchanging cattle and seashells to now much more sophisticated yet convenient forms of money.
As our world heads towards increasing innovations, the emergence of new currencies and money-handling systems is inevitable. The only question that remains is what will stay and what will pass as quickly as it comes.
If you enjoyed this article on The Evolution of Money and Cryptocurrency or have any questions for me, please feel free to leave them in the comment section below!
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