STORY OF MONEY: FROM BARTER SYSTEM TO BITCOIN

Money is anything that is frequently accepted as medium of exchange. Money makes it easier to exchange products and services, helps determine the cost of commodities, and gives people a way to store their wealth. Even though “money” and “currency” are frequently used interchangeably, they have important distinctions. While currency is issued in concrete form by the Government of the country, money is an intangible asset whose worth is determined by how useful one believes it to be.

THE BARTER SYSTEM

Money has been around since 6000 BCE when the barter system existed. Bartering is based on the straightforward notion that two parties negotiate to determine the relative worth of their goods and services and then offer them to one another in an equal trade. The Barter System had several drawbacks, though. For instance, if A trades B his cow for a pair of shoes, how is a cow comparable to a couple of shoes? When A wishes to repurchase anything, he must look for a different exchange valuation each time. There was no uniform unit of measurement under the barter system. Because the exchanged goods are perishable, they cannot be regarded as riches or used to meet future financial obligations. Additionally, the merchandise was challenging to move, which left them open to theft.

GOLD COINS

During 650 BCE, actual coinage began. It was created by the Lydians, who were “the first to strike and use coins of gold and silver,” according to the Greek poet Xenophanes of the sixth century, as cited by the historian Herodotus. King Croesus of Lydia (reigned circa 560–546 BCE), who developed a bimetallic system of pure gold and pure silver coins, is known from the foundation deposit of the Artemisium (temple to Artemis) at Ephesus. The first Croesus coins were struck in electrum, also called “white gold” in Greek. Later, he used this in his pure bimetallic gold and silver series. The opposing heads of a lion and a bull were stamped on each side.

The primary problem with the barter system, the shared unit of value, was resolved by the use of gold coins. Throughout the world, gold coins were recognised and given an equal value by everyone. Coins made of gold were not brittle and could be carried easily. As a result of the coins’ value being backed by gold, they were non-inflationary; consequently, demand was consistently high, and supply was limited. The reason we don’t use gold coins is that they have flaws. The cost of mining, the difficulty of transporting, and the ease of theft of gold coins made them expensive to use.

PAPER CURRENCY

In 1260 CE, China’s Yuan dynasty moved from utilising coins to paper money. However, when Marco Polo, a Venetian merchant, explorer, and writer who travelled through Asia along the Silk Road between 1271 and 1295 CE, visited China, the Chinese emperor had a solid grip on the money supply its multiple denominations. Where the words “In God, We Trust” presently appear on contemporary American coinage, a Chinese inscription from that era threatened to have counterfeiters beheaded.

Paper banknotes eventually took the place of the metal coins that depositors and borrowers carried. These notes may be taken to a bank at any time and exchanged for their face value in metal coinage, frequently silver or gold. This paper money might be used to make purchases. It operated in a manner akin to how money does in the modern world. However, unlike what is currently the case in most countries, it was not issued by the government; instead, it was issued by banks and other private institutions.

Due to its lighter weight, lower production costs, and initial backing by gold before being placed back in the government’s trust, paper money was favoured over gold coins. It has disadvantages because it is easy to steal, which has been a significant issue for money ever since the Barter System. Fiat currencies are also susceptible to inflation since the government can produce unlimited amounts of currency, which lowers their value. The lack of a tracking system for the notes also promotes the usage of illicit currency and the parallel economy.

CHEQUES

The cheques came into use in Europe’s middle of the eighteenth century. Goldsmiths and Scriveners aimed to make money transactions less complicated and risky. Thanks to a mechanism they developed, customers could make payments using written instructions while keeping their gold and silver safely housed in the vaults. By doing this, they made a service available that had previously only been available to persons conducting business internationally via bills of exchange.

The cheque’s design evolved along with its use. Samuel Smith & Co. of Nottingham received the first provincial English bank’s check that survived, which was written in 1705. Vere, Glyn & Hallifax produced the first pre-printed cheque form (aside from the Bank of England’s) in the 1750s, and the Commercial Bank of Scotland produced the first checks with the customer’s name pre-printed in 1811.

The sender and recipient’s identity was confirmed, and utilising cryptography as a signature for confirmation, the cheque increased security. Although it has flaws, bearer cheques can be stolen, cryptography can easily fake rudimentary signatures, and transaction verification is done later. The check is given to the recipient, who deposits it at his or her bank. Then the receiver’s bank connects with the clearance authority, which then connects with the sender’s bank to confirm that the sender has the required amount of money in his or her bank account. After this, the transaction is approved. When accepting a check, the recipient must ascertain whether the sender has sufficient funds in his bank account to complete the transaction.

MOBILE PAYMENTS

We then moved to the system of e-wallets with the launch of PayPal’s electronic money transfer business in 1999. Initially, PayPal’s user base grew by roughly 10% daily. Co-founders included venture capitalist Peter Thiel and TeslaCEO Elon Musk.

Mobile payments seem to be the best option. Fingerprint and iris scanners are standard on all smartphones. Since they don’t require paper money, theft is impossible. The transactions are efficient, practical, and rapid. Monitoring who has money and where it is being spent helps with regulation.

Since e-wallets are connected to the same financial system, there was still a need to look for alternatives despite their near perfection. We have no direct control over our financial matters, and third parties are involved in our transactions to guarantee their accuracy.

BITCOIN

A person or group publishing under the alias Satoshi Nakamoto published a white paper titled Bitcoin in 2009. Since then, Bitcoin (BTC) has remained the most popular and valuable digital currency globally. Built on the blockchain, Bitcoin is a decentralised digital currency maintained by a network of users that independently verify and document transactions.

Alternatives to Bitcoin include the US dollar and other fiat currencies controlled by governments and central banks. Transactions are instead validated using a strategy known as a proof-of-work consensus technique. Bitcoin miners compete to validate transactions using powerful computers to solve challenging mathematical puzzles.

After the creation of Bitcoin, many other cryptocurrencies were created; digital currency has revolutionised money and is a step toward altering the current financial system and decentralising money.

BOTTOM LINE

A remarkable evolution of money has occurred, including the trading of products, the creation of coins and paper money, and the impending transition to electronic transactions. People are hopeful that the current financial system will fundamentally change due to technological advancements and that this transformation will continue in response to human needs. As long as people require a method of exchange, the monetary system will change.