Can you believe, thousands of years ago there was no money? Money has been a part of human history and different things have been used as money over a period of time such as a shell, a metal coin, or a piece of paper or virtual as in case of Bitcoins. Money derives its value by being a medium of exchange, a unit of measurement and a storehouse of wealth. Money allows people to trade goods and services. Let’s trace the history of Money How The Money has evolved from bartering to Bitcoins.
History of Money
9000-6000 B.C: Cattle & Agricultural crops
Cattle, camels, sheep were the first things to be used as money. Land, possessions, even marriages were bought and sold depending on how many heads of cattle were offered. Then agricultural crops such as wheat or vegetables were also offered. This type of exchange thrived between 9,000-6,000 B.C.
1200 B.C. Cowrie Shells
Shells of clams, called cowrie, were first used as money in China. They were found in shallow waters in Indian & Pacific Oceans. Till 20th century they were still being used in Africa. In inland areas of China, there was a shortage of cowrie shells. So, they started making cowries from various materials such as bone, wood & metal.
1000 – 600 B.C Metal coins
The first metal coins were actually cowrie shell reproductions made of bronze or copper. China began minting them around 1,000 B.C. Over the next 500 years, they gradually evolved into the round “coins” we are familiar with today. These original coins were usually minted with holes in the centre so that they could be safely strung together on a chain.
700 BC Precious Metal Coins
In the Western World, coins were made in Lydia, modern-day Turkey. The coins, unlike in China, were made from gold and silver. They were stamped with Gods & emperors.. Greeks and Romans also started making coins. Coins were appealing since they were durable, easy to carry and contained valuable metals.
During the 18th century, coins became popular throughout Europe as trading grew. Coins containing precious metals are an example of commodity money. The item was traded because it held value. For example, the value of the coin depended upon the amount of gold and silver it contained.
Paper money was first developed by the Chinese in around 700 A.D, just after they invented woodblock printing. They called it ‘flying cash’ as it had a tendency to be carried away by the wind. When Marco Polo visited China in the 1200s he brought the idea of paper money back to Europe with him.
Paper money wouldn’t see widespread adoption in the west until the mid-1600s, when banks started issuing notes that promised to pay the bearer on demand a sum of gold. The first European banknotes were printed in Sweden. In 1644 copper plate money was minted.
The Bank of England founded in 1694, printed “Goldsmithnotes” as promissory notes from English gold smiths for account deposits. The clause “(I) promise to pay the bearer on demand the sum of (…) pounds” (i.e. in gold) originally meant that they could be exchanged for gold.
Money such as Paper money which is not valuable itself but can be exchanged for things such as gold, silver, tobacco etc is called as Representative money.
- Examples of Representative money: In 1715, Maryland, North Carolina and Virginia issued a “tobacco note” which could be converted to a certain amount of tobacco.
- In the late 1800s, the U.S. government issued gold and silver certificates. The gold certificate was used from 1882 to 1933 in the United States as a form of paper currency. Silver Certificates were abolished in 1963 and all redemption in silver ceased in 1968.
World War I and World War II made countries move away from the gold standard. The government could print as much money as the amount of gold/silver it had. To finance the wars, rebuild and to recover the damage to the economy, governments wanted to print more money. So they dropped the concept of exchanging paper money for gold or silver.
The world moved to the paper money where notes have no value otherwise, but for what they will buy. It can be offered in payment and by law, it could not be refused as a settlement. In other words, paper money is legal tender. Such Money is similar to Representative money except that it cannot be redeemed for a commodity, such as gold or silver. Such money is called as Fiat money.
The first credit card was introduced in 1946. So now one need not carry cash.
Mobile Payments and Virtual Currency
The 21st century gave rise to two disruptive forms of currency: Mobile payments and virtual currency. A mobile payment is money rendered for a product or service through a portable electronic device such as a cell phone, smartphone or PDA. Mobile payment technology can also be used to send money to friends or family members. Increasingly, services like Apple Pay and Samsung Pay are vying for retailers to accept their platforms for point-of-sale payments.
Virtual Currency:Bitcoin , invented in 2009 by the pseudonymous Satoshi Nakamoto, became the gold standard–so to speak–for virtual currencies. Virtual currencies have no physical coinage. The appeal of virtual currency is it offers the promise of lower transaction fees than traditional online payment mechanisms and is operated by a decentralized authority, unlike government issued currencies.
Video on History of Money
The YouTube Video below shows the history of money