Money is essential; it is that much significant that most people end up living their lives, earning it only. However, the history of money doesn’t date back long. For comparison, if the whole Homo sapiens history would convert to 24 hours, money would have existed for the last 18 minutes only. The internet and press invention had a prominent role in it.
Here, in this chapter, we’ll in detail try to describe the utter history of money, from its inception when commodities were currency representatives to today when crypto is the new money.
In the inception, people used the barter system as a medium of exchange. A barter system is the exchange of goods or services in place of another service or good. For instance, one exchanging a bag of wheat in place of a pack of lentils or someone might build a house in exchange for a bag of beans. However, the problem with the system was no standard rate of exchange and many times deals failed if the parties involved couldn’t come to a consensus about the value of goods. Sometimes, a person who needs any specific commodity, say salt, is required to look for a person with salt and must have something to give him, which the salt owner would need, failure in which nullifies the deals.
To tackle the issue, people created a thing called commodity money. The commodity money included some of the fundamental goods which everyone needs and thus, could be exchanged anytime by anyone. The primary commodity money items were salt, beans, seeds, cattle, tea, and tobacco. But gradually, this system also created problems like the commodities were perishable and difficult to use. Some other issues were transportation and value. Dragging a heavy bag of salt or beans, or taking the reluctant cattle for the exchange was a hectic task. In cases of service traded, conflicts between the commodities owner and service giver came into the picture too.
Although metal being used as money is recorded back to around 5000 BC, the Lydians (now called Turkey) people were the first to use and manufacture metal coins to use them as money in 700 BC widely. The metal coins were assigned some specific value making it accessible and straightforward for people to value and compare the price of the goods. Soon after Turkey, most nations started manufacturing their coins as these tiny metals were easy to operate, recyclable, and readily available.
Notably, nations like Australia, South Asia, Africa, or Oceania, used seashells as currencies, with some dynasties using metal coins with a hole in between for facilitating carriage. The Romans, however, established Denarius, their currency. The coins were made from precious metals like silver and had prominent symbols about the Romans.
Paper currency, on the other hand, became common in 960 AD, where the issue is tracked earliest in China. In around 118 BC, the Chinese used white deer’s skin as leather notes, with painted edges, to establish the modern-day paper currency concept.
However, around 700-1100 AD, paper money appeared for the first time in the Tang Dynasty. The paper notes came after the metal coins created problems like heavy baggage during large transactions and a shortage of copper. Marco Polo, the European explorer, is credited with the introduction of paper currency to Europe, after getting inspired by China.
After the operation of non-precious coin metals and paper currency, commodity money changed itself to representative money, which means that the material from which functional currency should be made need not hold much value.
The representative money was further supported by bank promises and the government to swap it for silver or gold. For example, the convent pound sterling or British pound bill was redeemable for a pound of silver sterling by the administration. Most of the money was a representative currency of the gold standard in the 19th and early 20th century.
In 1661 AD, the first European notes were printed by Stockholms Banco in Sweden and were redeemable against silver, held by the government. However, the bank eventually issued more notes than the held silver, and in 1668, the bank and the system collapsed.
In the 19th century, the notes were then backed by the gold, redeemable anytime, and held by the government, where one dollar bill represented 23.22 grains of gold.
The first credit card issuance is credited to John Biggins, a banker, in 1946 in Brooklyn. A customer used the card for a purchase, and it was forwarded to John’s Bank. However, the system became widely used in the 1970s when the magnetic strip on the cards was imprinted. It consisted of client information only to be decoded by machines.
The American Express was the first card to be operated globally in 1958. The Bank of America also issued a credit card in 1958, but its use was limited to California only.
In 1990, chip technology came into the picture, which allowed more information to be stored. Mastercard created a global operating chip cards system. In 1994, www (World Wide Web) came and started the online transactions ecosystem. The first online purchase was a pizza from Pizzahut.
In 1998, PayPal was started in California, which allowed the margin to transfer money and make payments. The company is credited with the emergence of internet-based ventures, which led the company to get acquired for $1.5B in 2002 by eBay.
In 2008, Bitcoin, the first-ever digital money, was created by a person called, Satoshi Nakamoto, its pseudo founder. The money was made using a technology called blockchain, where the money is mined using complex mathematical calculations and heavy computers.
The currency marked its success due to several factors like its decentralised nature, lower professing cost, easy to execute, and fast.
In 2012, Ripple followed Bitcoin and became the second cryptocurrency to be launched with some developments. Gradually, the market went on to become massive, and today, the cryptocurrency market is valued at over $350 billion.
So, this was the complete detailed history of money, the currency we use today. Did you see how vast and exciting is the history of today’s medium of exchange? However, the real question is what would be the next advancement in the line, after crypto.