Cryptocurrency is just the latest innovation in the history of exchanging money for goods and services. While it may only exist in a digital sense, Bitcoin could certainly be classified as a type of money for the digital age. It can be traded with others for things you want and need. Man has been using various forms of money since the very dawn of time. Here is a brief history of money and how it applies to Bitcoin.
Money Makes the World Go Round
Money may be described in very broad terms as what makes the world go round. It allows us to purchase things we want, pay our bills, and compensate those who do work for us. Without money the world would be a much different place. There are about 150 fiat currencies in existence around the world. This does not include cryptocurrencies like Bitcoin which are becoming more prevalent by the day.
We would recognize examples of money as the USD, EUR, or JPY. These exist as actual physical pieces of paper that you can hold in your hand and spend at a local retailer. But cryptocurrencies are also money, even though they have no physical existence. You can still receive them from others, and you can spend them on things you want.
More than 70% of the world’s physical money is represented by the dollar, Euro, pound, yen, and yuan. These are the big players in the world’s currency market. Money has a value that is usually expressed in a precise figure. For example, a US dollar will buy you $1 worth of goods all the time. The price of the goods may increase or decrease, thereby inflating or deflating the value of the dollar, but $1 will always be $1.
In contrast, one Bitcoin will always be one Bitcoin, but its value may change from day to day. A single Bitcoin could be worth $6,000 today and $3,000 tomorrow. The cryptocurrency market is known for being very volatile. The reason for this is that cryptocurrencies are most often expressed in the value of a fiat currency. They are not dependent on that currency, however. The rise of fall of a fiat currency does not specifically affect the value of a digital token.
Bartering Births Money
In the dawn of civilization mankind was faced with needs that aren’t so different from the needs we have today. He had to have food, shelter, and clothing. In most cases he was able to meet his own needs, but at some point it became common for men to barter with one another.
Let’s say that you were lucky enough to possess some fine weapons for hunting. Your neighbor had some very fine hides. With winter approaching you offer to trade some of the weapons you had made for some of the hides. The neighbor gets a tool he needs to hunt and store meat for the winter, and you get a nice coat to protect against the cold. This win-win form of exchange was known as bartering. It is still something which is practiced in many parts of the world today.
About 9,000 BC men began to trade cattle and other livestock for essential items. You could say that cows and grain were among the first forms of money. These items could be given to someone else in exchange for valuable tools and implements. We still see the leftover effects of this today. The grain market is one of the largest financial markets in the world, and things like sugar, soybeans, and corn are actively traded on a daily basis.
As history marched on there became a need to establish something which could tangibly represent value. In 2279 BC the Babylonian people came up with the shekel. The shekel was based on weight, and it could be used to obtain goods such as barley and gold.
By 1300 BC cowry seashells were being used to represent money. This took place on the African and Australian continents. Whole shells as well as fragments could be traded for things of value. As you might imagine, the industrious individual could increase their buying power by taking the time to find cowry shells. This can make for a very poor form of exchange. Imagine just being able to go out to the ocean and scoop up some dollar bills whenever you are in need. We would all love that type of economy!
It became apparent that money was in need of its next evolutionary step. There had to be the creation of something unique, something that could not be easily obtained, to define money. This led to the creation of the coin and the predecessor of what we call money today.
The Chinese Invent the Coin
In 1100 BC the Chinese made a monumental advancement in the concept of money. They began to develop distinct icons in the form of small knives and spades that represented money. Eventually these little tokens gave way to coins that could be carried on a string. The earliest Chinese coins had a hole in the center which made it easier to transport them. The string on which they were carried became the modern forerunner of the wallet.
It didn’t take long for other societies and cultures to begin minting their own coins. The Roman Empire created the Denarius in 300 BC, and most of these coins were made of silver. A coin could be more easily exchanged for something of value, and there was the added benefit of coins being difficult to duplicate. Of course, the advent of the coin also heralded the advent of the counterfeiter. As long as there has been money, there have been people trying to reproduce it in bogus forms.
The popularity of the coin created another problem. What was one to do when they amassed a large number of coins? Only so many could be carried on a string. The Chinese once more proved to be innovators as the creators of the world’s first paper money.
The Chinese Invent Paper Money
If you were to ask Donald Trump, he would probably tell you that he invented paper money. The truth is that the Chinese were the first society to produce currency as we know it today. The very first bills were made of a supple and thin leather. The leather was made from deer skin that was white in color and very rare. It was then painted in vivid colors. These slips of leather could be exchanged for almost anything one needed.
In the beginning the use of paper currency was rare. They gained much traction when a shortage of copper prevented the country from minting new coins. Marco Polo was one of the first explorers to encounter Chinese currency, and it may have been Polo who introduced the form of exchange to Europe.
Europe began to produce its own banknotes in 1661 AD. These notes were made in Sweden. They could be exchanged at a local bank for silver coins in the amount indicated by the note. This is also notable because it was a forerunner of banking as we know it today.
Gold Becomes the Standard
In 1800 AD the idea came about to combine coins and paper currency into a form of exchange that was more versatile. It was also hoped to clearly define the value of coins and currency so that their use could be more universally applied. The solution was to create the so-called gold standard which backed all issued coins and currencies with an equal amount of gold.
In the US, the most famous example of the gold standard is Ft. Knox. This is supposedly where the US maintained a supply of gold that would back the issue of its currency. Some have speculated that the gold in Ft. Knox is long gone, but the gold standard still became a fundamental turning point in the evolution of money. Simply stated, it mandated that a country must back its currency with a tangible asset. So, let’s say in theory that you wanted to cash in all of your currency for gold. The gold standard mandated that you could do that, and the government was supposed to have your gold ready if ever you should come calling.
The Great Depression Ends the Gold Standard
All good things come to an end. When the Great Depression hit the US in the 1920’s, the value of gold plummeted. With it went the value of the dollar. The US decided to abandon the gold standard in favor of a more liquid economy. The simplest way to explain this is that the US chose to print more money and introduce it into circulation. This helped to stimulate recovery, and other countries soon followed suit. The gold standard was abandoned forever.
Some would claim that the end of the gold standard wasn’t necessarily a good thing for the US. Recently the president of the US suggested that the country could resolve its debt crisis by simply printing more money. Economists know that this is a recipe for disaster. Such measures can ultimately lead to a recession of the economy.
Plastic Money – The Rise of the Credit Card
In 1946 John Biggins came up with a novel concept. He decided to create a card that could be used by his banking customers with local merchants. The customer would simply present the card and the merchant would create a bill. The bill would then be sent to the bank and paid. The bank would then debit the account of the card holder for the purchase. A fee was included, of course. The credit card was born.
It would be hard to imaging living in a world without credit or debit cards today. We use them for just about everything you can imagine. The world has come a long way since the first American Express card was issued in 1958. Since then, people have not left home without these valuable pieces of plastic.
Digital Money – The Rise of Bitcoin
In 2008 a mysterious computer programmer known only as Satoshi Nakamoto described the idea of a virtual currency that could be used without the need for banking institutions. He called his idea Bitcoin, and the next revolution in the progression of money began. This digital form of money defies everything that individuals have come to understand about how money works. It has no physical existence, and it can be used with a relative amount of anonymity.
Right behind Bitcoin came the introduction of other cryptocurrencies like Ethereum , xrp and Litecoin. In just ten short years these forms of money have become a legitimate player on the financial scene. They are traded on their own exchanges, used to buy goods and services, and saved in cryptocurrency wallets that are similar to a private bank account.
Cryptocurrencies have the potential to move society into the direction of a paperless standard of exchange. They have changed the way individuals envision money, and how they choose to spend it. The next ten to twenty years should be very exciting ones for the history of money.
*** Here at CryptoSwede you will find information on Crypto Mining the different cryptocurrencies as well as the best cryptocurrency exchanges. You can trade or you can set up trading bots instead and then store the crypto on crypto wallets. Later, spend them using crypto debit cards!***