From barter to blockchain: A history of money

The Big Bang brought the world into existence 13.7 billion years ago. Life first appeared on our planet 3.8 billion years ago. Earth witnessed a hominid species, Home erectus, walking upright for the very first time 1.9 million years ago.And, 7,000 years ago, money was devised.

But first, folks bartered

Not everyone had everything. We constantly had something in excess, and we always needed something that the other person needed. Thus, we began measuring our excess resources for what we had.

Imagine I’d extra apples and you’d extra oranges; we could simply swap fruits with one another.

What if I’d excess apples but didnt want your own oranges? But Id like to have some berries.

You would find somebody who can provide you strawberries in exchange for your own oranges. Fortunately you find your friend, Joe, to barter with you.

Afterward, youd bring me those berries, and Id give you some apples.

Joe, you and I are all happy.

But what if Joe had excess bananas, but he didnt want your oranges either? That would be an issue.

The clever among us began asking a profound question: Is there something that everyone wants?

Afterward, there was commodity money

There were a few things that nearly everyone used, such as salt, seeds, sheep and cows. They became the commodity money. If we had any of these, we could use them to get whatever we wanted.

We always understood that at any given point in time, there would be no one to deny our supply of commodity money. These were the resources that everyone used, so everyone appreciated them. The system only worked.

Commodity money wasn’t without its own difficulties, however. Carrying sacks full of seeds to another city was difficult. Additionally, storing them was a huge problem. If kept for longer periods of time, they would perish.

Then, the clever among us began asking another profound question: Why is there something that is easier to transport and store that is still valuable?

Metals were the answer

Metals were easier to transport, divide and shop, and were also scarce (consequently, making them precious). Nations and kingdoms started minting their coins of various weights which bore their seal. The seal assured the weight and credibility of the coin.

By this time, people had evolved past the stage where all that they did was for survival.

Each coins value was measured by the material which made it. Dependent on the metal used and its weight, coins obtained their worth.

Coins were mostly made from gold and silver because they were rare to mine and didnt corrode, thus ensuring a steady weight. Because they were easy to carry, we even took it a bit too much: We began using them in the form of jewelry so that they would always remain in our ownership, and others might see how rich we were.

But this caused a bit of difficulty thieving.

Temples came to the rescue

Gods came to the picture long before money entered. They lived in temples, and our precious metals found their home there, too. We began storing them in temples because nobody had the guts to steal something from God. Thus, the coins have been considered to be safe.

The moment youd deposit your gold with all the temple, the priest could provide you a paper receipt that said the quantity of gold gathered. It was a promise by the priest to never deny gold to the bearer of this reception.

Before we realized it, banking had arrived

The paper receipts represented the value of this gold which was deposited with the priest, so consequently, transferring the paper receipt would imply transferring the gold itself. The representation of money entered our society. We began using promissory notes instead of gold because they immediately represented the gold and were easier to transport and store.

Consumer banking selling debt to middle class families has been a gold mine.

— Elizabeth Warren

In time, governments and banks replaced temples. Throughout the nineteenth and twentieth centuries, almost all of the monies in existence were based on the promise of gold and silver in their yield. The paper held its worth because it represented a rare resource, the precious metals held by those governments and banks.

Until it didnt anymore.

The rise of fiat monies

A rare resource doesnt back the monies we use today. This is only because moneys worth no longer depends upon the worth of gold; it depends upon the stability of this government within whose jurisdiction it is being used and issued. The reputation of the government gives money its worth today.

The paper we exchange for products and services is really the money itself. Youll not get gold back in the event that you go and hand a paper bill to your lender.

Because central authorities like banks and governments controlled the value of that particular paper, to make the system more effective, they substituted those precious papers with precious digits saved on a computer.

Money goes digital

I found it amusing when I first discovered it. First, banks replaced gold with agent newspapers, then they place value on those newspapers, just without financing them with actual gold. The same cycle repeated once more, and banks announced, people are able to still steal your paper money. You paper money is still perishable. Why dont you deposit you paper money with us and in trade well make an entrance in our computer thatll inform you how much we owe you? Whenever you come asking for you paper money, well return it.

To us, the masses, the proposition seemed reasonable. Those digits in the computers were endorsed by our deposited paper money.

Until it wasnt anymore.

Banks create new money whenever they make trades. Think about you take a loan of $10 from a bank. The lender will not give you someone elses $10. Rather, they will just charge your account with $10 in the form of an IOU from the lender to you. You can devote the IOU worth $10 the same as youd invest an actual $10, therefore, developing a replacement for money. Additionally, this is exactly the same thing that happened when we substituted gold with newspapers.

That is the reason if everyone of us goes to our own banks and demands cash at precisely the same time for whatever our accounts are worth, there will be enough cash.

Money that used to count on the worth of a rare metal has now become just a number in someones computer somebody elses computer.

In the dawn of this twenty-first century, the clever among us began asking another profound question: When money can be just some digits in a computer, can there be a way to still back it with a rare resource? And does this need to be kept on the computer of a centralized authority?

The sunrise of cryptocurrencies

The planet is connected via the world wide web now; it’s at everyones hands on. Computers make us more effective at what we do than we ever were. What used to take us days requires minutes now. We couldnt make additional time, so rather we create more out of the time we’ve.

Computing electricity is such an integral part of our life that it’s become as rare and precious as gold was to our ancestors. And when smart folks asked the profound question: Can we create a money that is backed by computing power? , the answer was cryptocurrencies and blockchains.

In case you dont yet know how blockchains work, Ive written the greatest guide in plain English to assist you understand the concept.

WTF is money?

Individuals have been trading long before money existed. We bartered with people whom we trusted. These were the folks who believed in exactly the same tales we did of gods and mythological creatures, among others.

Cash is a story that everyone believes in.

We believe in it because everyone else believes in it. The story gives money its worth. And this story has become more and more abstracted as the sophistication of our technology has increased.

Are cryptocurrencies the Holy Grail of money?

They are, for now until something better comes along. Cryptocurrencies are decentralized, but that doesnt mean everyone will have equal parts. It is one of those misconceptions I keep hearing.

Because cryptocurrencies are entirely decentralized, will everyone have equal parts of it?


If a money is to flourish in the long term, it must be endorsed by a rare resource. Scarcity has the property that it is not evenly distributed. When it was, it wouldnt be rare in the first place.

Thus, money, by design, is such that there have to be rich and poor in society for it to have any worth. There must be people who have too much it, while the rest desire to have too much it.

With cryptocurrencies, power and authority may change hands, but that will not change how society acts as a whole. The earlier you become part of this cryptocurrencies, the more youll have.

Kings will fall.
Kings will rise.
But the money,
Money stinks.

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