Unveiling the Evolution of Money
The history of money depicts the evolution of man’s economic, technological and social life. From the barter trade system, money has developed through various forms to today’s money.
Early Beginnings: Barter and Commodity Money
In ancient economies, barter was used to convert goods and services. This system was inefficient because the exchange required the “double coincidence of wants,” meaning that each party had to want the other person’s good. To overcome this weakness, commodity money relied on articles with intrinsic value for use as a medium of exchange, such as grains, cattle, or metals like gold and silver.
The Emergence of Coinage and Paper Money
It was around 600 B.C. when the Lydians in today’s Turkey introduced metal coins that were standardized in weight and value. Many merchants accepted gold, silver and bronze coins because they were portable and could be used for purchasing goods. Metal coins also emerged as a preferred medium of exchange and formed the backbone of economic models in the world. Chinese issued the first paper money during the Tang and Song dynasties, from 618 to 1279. Used first as bills of credit, they were made legal tender and helped to trade over distance. By the 13th century, paper money had arrived in Europe through the Silk Road and had contributed to the transformation of the world economy.
Modern Developments: Banking and Fiat Money
The history of money was revolutionized by the introduction of famous banking systems in Renaissance Italy. The paper currency originated from the banking system, where notes were issued to be exchanged for gold or silver deposits. It formed the basis for the modern concept of banking as well as fiat money, money whose value is based on the authority of the government.
Digital Revolution and Cryptocurrencies
The last decades of the twentieth and twenty-first centuries were the time of the digital revolution in the financial sphere. People altered the mode of their transactions using electronic money, credit cards, and Internet banking. The appearance of other digital currencies, including Bitcoin, signified the decentralized digital currencies that employed the blockchain and seemed to have more security and surety compared to traditional financial institutions.
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