Evolution of Money: From Barter to Bank Notes to Bitcoin

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By Degen Lipsa

Money makes the world go round. More specifically, it greases the financial and commercial machinery. Governments have always been concerned with the sufficiency of the supply of money, coins, and their financial derivatives since it is essential for the stability of the economy and, by extension, the state. Throughout history, money has undergone significant changes in its form and function. From the early days of bartering and trading goods and services, to the introduction of coins and paper currency, and now the rise of cryptocurrencies, the evolution of money has been nothing short of revolutionary.

Money and currency are frequently used in the same contexts. But according to a range of concepts, they are not the same. Several views contend that money is a fundamentally tangible idea. However,  The concrete or physical representation of the abstract concept of money is called currency.

In this blog, we will take a closer look at each of the forms that money transformed into, their differences, and how they have impacted society and commerce.

The evolution of money from Barter to Commodity exchange :

Bartering has been practised since 6000 BC. Bartering was first used by tribes in Mesopotamia and was later adopted by the Phoenicians. The Phoenicians traded goods with people in different cities located across oceans.

Humans used the bartering system to get the goods and services they needed before the invention of modern money. Without the use of money, bartering included swapping one commodity or service for another. For instance, a farmer and a rancher could exchange a cow for a bushel of wheat. Although this approach had some success, it was not without its problems. A double coincidence of wants was necessary for bartering, i.e., each party had to be interested in the other’s offer. Also, since there was little transportation, it made long-distance trade impossible.

The commodity money system eventually took the place of the bartering system as cultures became more complex. Money that is backed by a material good, such gold, silver, or tobacco, is referred to as commodity money. Because the product itself is valuable, commodity money is valuable. This arrangement gave rise to a standardised method of transaction and did away with the requirement for two demands to coincide. It also made it possible for trade to take place over large areas because the commodity could be moved with ease.

The evolution from Commodity to Currency :

Currency was the next significant evolution of money. A central authority, such as a central bank, is authorised by a government to issue currency, which is a form of exchange. The Tang Dynasty in China introduced the first kind of money in the seventh century, but it wasn’t until the sixteenth century that paper money started to be widely used in Europe.

The adoption of currency made trading more uniform and efficient because it did not require a physical good to back it. Instead, the legitimacy of the government and the confidence of the populace who used the currency defined its worth. Because it offered a uniform method of trade that could be applied to a wide range of products and services, currency allowed for the development of more sophisticated economic systems.

However, The fact that currency is prone to inflation and devaluation is one of its drawbacks. Government overspending or excessive money printing can cause inflation, which lowers the value of the currency. However, as shown in instances of hyperinflation or currency crises, currencies can devalue if the government loses the confidence of its citizens.

The evolution from Currency to CryptoCurrency :

Cryptocurrencies represent the most recent financial revolution. Cryptocurrencies are digital or virtual money that control the creation of new units, as well as secure and verify transactions. Using the alias Satoshi Nakamoto, an unidentified person or group of people released the first cryptocurrency, Bitcoin, in 2009.

Cryptocurrencies are decentralized, meaning they are not backed by any government or central authority. Instead, they rely on a network of users to verify transactions and maintain the integrity of the currency. This makes them highly resistant to inflation and devaluation, as there is no central authority that can manipulate the currency.

Cryptocurrencies also offer several other advantages over traditional currency. They allow for faster and more efficient transactions, as they are not subject to the same limitations as traditional banking systems. They also offer greater privacy and anonymity, as transactions can be conducted without revealing the identities of the parties involved.

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