Ka-Ching! 💵 The History of Currency and Money (psst, it includes cows)

October 24, 2018

One of the most significant and impactful human inventions was the creation of money, as a medium of exchange to promote the distribution of goods. Prior to money, transactions were executed through a barter system; exchanging goods you sought with goods you owned. This method of transfer had many problems and the ideal solution was the introduction of a common currency. Since the early use of coinage, some discoveries and mediums of exchanges have evolved into the latest trends, like cryptocurrencies. The history of money from ancient times to where the world is today, likely started with cows as currency. Moo!

Early money

In Africa, the first currency used was cowrie shells, yet across the world in America, currency was the wampum. The cowrie shell originated from the Maldives Islands in the Indian Ocean and was used in the early Portuguese trade. The Native Americans used a small white cylindrical shell for ceremonial donations. However, by the third millennium B.C, Egypt and Mesopotamia started using currency in their business transactions, because it was much simpler for traders, especially when travelling. Currency was gold and silver coins; the weight was used to determine the value.

In the western world, electrum metal, a natural alloy of gold and silver, were commonly used as money. The coin was bean shaped, and each side had a picture like a lion or another animal, all which represented different quantities and later different regional currencies. Later, the first coins of pure gold and pure silver were minted by King Croesus. Bronze coins were used in Rome and China by melting bronze and pouring them into molds.

A shift to paper currency

The Chinese were the first to graduate from coins to paper money, as a solution to the inefficiencies of copper coins. Paper money was first introduced during the Song Dynasty. In the 13th century, Europeans were made aware of paper money, due to the accounts of travelers like the famous Marco Polo.

American coinage and paper

After the Civil War, the prices of copper, silver, and gold spiked due to uncertainty. Most of the coins were destroyed during the war, so money that remained, was actually metal collected by regular citizens. Imagine collecting the money we use! The national administration fought to combine certain denominations and restock the fast fading coin supply, but the methodology was inefficient. For example, the one cent and the five cent coins changed to new mixtures of nickel and bronze. Although this was cheaper than using silver and copper, it was not working for larger denominations, so the government settled on paper money as the best solution.

It took time before the American public adopted the paper notes and trusted them. Paper notes allowed the government to issue money without buying expensive gold and silver metals.

Non-monetary exchanges

Not every financial transaction includes a transfer of cash. Non-monetary assets, or other liabilities, can include transactions like accounts receivable. These transactions can be as simple as updating a phone number, or more substantial like transferring the deed on a home.

Non-monetary exchanges can either be two-way, or one–way, depending on the agreements of those involved.

Cryptocurrency

A cryptocurrency is a modern, virtual currency which works as a medium of exchange and is intended to be anonymous and secure. Someone can invest, buy goods and it can also be used as a means of payment if a business accepts it. Each transaction is recorded on a blockchain, a public ledger which is sometimes replicated through a network of computers, to run the currency. Miners run the blockchain, record and tally transactions whenever a transaction is carried out. Cryptocurrency has slightly affected monetary value since it is safer, but not severely because it has not yet become very common to ordinary people.

Show me the money

Money has evolved beyond a simple transaction of goods sold, it plays a huge role in our society. In its physical form, money is simply a coin, paper bill or virtual e-transfer, but it represents so much more. Money has changed humans in countless ways. It affords people status, power and influence – we’ve come a long way from bronze coins traded over a campfire. Money affords people the ability to make choices that affect all members of society.

“You know what keeps us from sliding back into barbarism? Money. That is the one constant.” This immortal quote from Noah Hawley’s A Conspiracy of Tall Men in reference to how society remains intact.

The future of money

With cryptocurrencies gaining popularity and fintech companies redefining our relationships with money, an exciting shift could be underway. It’s an interesting time because these new tools have helped place the power of choice back in the hands of everyday people.

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