Brief History and Evolution of Currency
History of Money
Money has been instrumental in how society and commerce have evolved over the centuries. Barter was found to be inefficient, and so humans had to develop another tool that would facilitate trade between people.
- In 1200 B.C., cowrie shells were used as money in the Pacific, in China and some parts of Africa while in other countries animal skins were the valuable things.
- In 1000 B.C., China started to use metal in their money. They made metallic cowries using bronze and copper.
- Coins began to catch on and in 500 B.C. in Lydia (in Turkey), coins were made using a mixture of gold and silver. The back portion was stamped, and with precious metals being its core material, the coin had significant value.
- In 806 A.D., paper money started to appear in China because of shortages in copper.
- During the 1600s, banknotes started in England. The ability to pay was backed up with having gold. In 1816, gold became the standard of value in England. The first bank in Europe to issue printed money was Swedish Stockholm Bank in 1661.
- In 1900, the Gold Standard Act was enacted in America which led to the creation of a Central Bank. However, by the end of the Great Depression in the 1930s, the gold standard was dropped.
- In 1933 U.S. abandoned the gold standard, and completely removed the link between the dollar and gold in 1971, now USD value is not linked to any specific asset. In other words, the U.S. dollar can’t be considered real money.
From then on, paper money continued to be the standard form of money, and in the 1960s, the first version of credit cards began to emerge. Credit cards remain prevalent today and many countries especially developing nations are still growing in credit card usage. Developed nations, on the other hand, are moving towards digital wallets and other digital payment platforms in their quest for a cashless society.
IMPORTANT NOTE #1: Money and Currency aren’t the same!
IMPORTANT NOTE #2:
2 billion people worldwide do not have a bank account or access to a financial institution via a mobile phone, or any other device according to the World Bank’s Global Financial Inclusion database
Digital Currencies 1.0
Now money can be stored on digital wallets like Google Pay and Apple Pay. You can also pay online through bank or credit card linked accounts like a PayPal account (or using Venmo). Many countries are pushing towards a cashless society like Japan and Singapore.
FACT: The study, which was conducted in 13 European countries, the United States and Australia, found that in many places where cash is most used, people are among the keenest to ditch it.
Overall, 34 % of respondents in Europe and 38 % in the United States said they would be willing to go cash-free, according to the survey conducted by Ipsos for the ING bank website eZonomics. Source
Then came Bitcoin, the first serious virtual currency and is slowly gaining more acceptance globally. A person under the alias Satoshi Nakamoto created the bitcoin currency in 2009 as an answer to the subprime crisis that hit America which ultimately led to a global recession.
There are no transaction fees involved when using Bitcoin and there is a growing number of merchants that accept Bitcoin!
Also, Bitcoin is not tied to any regulation which allows international transactions to be cheap and easy. Many businesses accept bitcoin because there are no transaction fees unlike when customers use credit cards to pay.
However, there’s still a big problem in the Bitcoin world — scalability. A report from Juniper Research predicts that the number of active Bitcoin users worldwide will reach 4.7 mln by the end of 2019. That’s very slow… And any other cryptocurrency has the same issue due to problematic scaling future, e.g. “mathematical proof that it is impossible to determine the ‘true’ transaction history in a proof-of-stake blockchain without an additional source of trust”, sharding… Hence, we can look at Bitcoin as an asset rather than a currency.
We hear a lot about possible Blockchain scalability solutions, or even about alternative solutions like IOTA has to offer with it’s Tangle technology. However, if you’re not into cryptography, technical analysis or programming, try to realize 1 simple notion: bitcoin is only the beginning for blockchain technology and blockchain technology is only the beginning of a new decentralized economy.
Digital Currency 2.0
The latest evolution is creating a new digital value standard. Instead of putting a value on money or a number, this new stage values time. Think about any other asset on our planet, is their any equal asset for 7.5 billion people? Imagine a post-economy tool where everyone has the same amount of time regardless of social status, race or nationality. Contrast that to the massive inequality regarding financial wealth in the world.
Such projects as Nimses taps blockchain algorithms and artificial intelligence to digitize the life lived of every user registered to the system.
According to Paul Vigna, a reporter at the Wall Street Journal, “The Blockchain keeps everyone honest, and a whole layer of banking bureaucracy is removed, lowering costs.” Banks have been slow to adopt financial technology unlike cryptocurrency groups which utilize the Uber versatile blockchain.
Additional sources:
P.S. If you want to delve deeper into the existing financial system, please watch:
The Federal Reserve Explained In 7 Minutes
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