Since almost the beginning of known history, money in one form or another has existed. In this article, we look into different forms money has acquired throughout the years - from Bartering to Bitcoin history of Money.
Capital.com - This is a guide to the history of money, spanning from the before the ancient Kingdom of Lydia to Bitcoin, today’s digital currency.
Bartering to Bitcoin History of Money
One of the world’s oldest and most traditional forms of currency was livestock trading. From cattle to reindeer (Siberia) to Buffalo (Borneo) to sheep (Hittites), livestock has been traded for many ages through a form of bartering.
Slavery and human currency
Human life, over much of history, has been traded as a commodity, and in some cases even as collateral. Valued based on numerous factors, unequal amounts were placed on humans with some seen as more valuable than others.
Shells and primitive metals
Alongside livestock, primitive metals and cowrie shells have long been exchanged as forms of currency. Each with its own region and market.
The first stamped coins
Archaeologists discovered that between the ages of 640–630BC, the ancient Kingdom of Lydia, located in Asia Minor, modern-day Turkey, was one of the first places in the world to produce coins as we know them today.
Under King Alyattes, the Lydiansdeveloped coins.Made from an oval nugget of electrum, an alloy of gold and silver, which was stamped on one side with the Lydian lion creating a flat coin.
Each of these coins, though irregular in shape was carefully ensured to be of equal weight and, therefore, value, making dishonesty in financial transactions a lot harder.
All that glitters is gold
When Greek King Croesus, reigned Lydia from 560–546BC introduced new coins of pure gold and silver, his capture by the Persians cause the spread of the usage of coins, paving the way for the next step in currency.
Gold acts as a unit of account, a medium of exchange and a store of value. For these reasons, it retains its position as a stable in international monetary systems.
Cloth and grain
Cloth and grain were key commodities in the histories of China, Korea, and Japan, with silk especially taking center stage and acting as a measure of value, medium of exchange and store of value.
The T’ang dynasty (618–907 AD) of China used a monetary system based on dual coin-textile transactions with prices of goods and debts calculated against rolls of silk.
Worth their salt
Derived from the word ‘salary’, salt is a worthwhile mention in the history of money. The term ‘worth his/her salt’ originates from Roman soldiers who were purportedly paid in salt.
Animal pelts, bones, and teeth
Animal derivatives have had a long presence in currency. Pelts were sold and traded, holding value not only as an item but as a protection from the cold.
When coins were in short supply in China, leather money made from one-foot square pieces of white deer hide was used. This was said to be the world’s earliest form of bank notes.
Bones, whale teeth, and elephant ivories have also been used across various cultures. However, cultural variations make them difficult to standardize and they hold a low acceptance level.
It is believed that paper money has been in effect since the T’ang dynasty in China, with cash existing longer than that. Several states, the territory of which would become modern-day China, created money in various forms including knives, spades, imitation cowrie shells and rounds discs with a hole in the center.
Currencies and credit systems: Rai stones and Kissi pennies
The credit begins with Rai stones. On the island of Yap in Micronesia, Rai stones were used to record transactions. These large stones, up to 12 feet in diameter had large holes in the middle to allow them to be transported, despite their sheer weight.
The family with the largest stone was considered to be the wealthiest, even after the stone had vanished into the sea this was instilled in culture as a truth.
Kissi pennies were used in West Africa in the late 19thcentury. A form of coinage made from iron and measuring 9 to 15 inches in length, they were tied together in bundles of 20 to be used in transactions – a cow 100 bundles, a slave 300 bundles, a virgin bride 200 bundles.
Today they hold ritual and cultural value only.
Currency in the Modern World
Today, the dollar is one of the world’s most popular currencies. It has been adopted in many countries worldwide as both an unofficial and official currency, particularly when a state’s own currency is failing due to hyperinflation.
The US began issuing dollar coins in 1787, with the first modern American dollar created in 1913, at the same time as the Federal Reserve System.
Derived from Jachymo, a German ‘thal’ (valley), that sat on a seam of silver. From this ‘thalers’ were created. The word dollar is an Anglicised version of this and was brought to Scottish territory by King James VI, who issued a 30-shilling piece, also known as a ‘sword dollar’.
This distinguished it from English currency and was in use until the 1970s. Ties between the value of dollars and sterling have been long held. With a pre-decimal UK crown worth a dollar and half a crown as half a dollar.
Cigarettes, chocolate, and non-cash currencies
In tough times, trades work just as well as cash payments, sometimes even better. Take World War II, for example. During the war, those who were taken prisoner used chocolate, cigarettes and prison scrip money as an intra-prison currency and a form of bribery. Even today this type of system can be seen in prisons.
This was also the case in Ceausescu’s Romania, where cigarettes were traded in lieu of the almost valueless currency. Or, Aztecs who traded cacao beans to buy other commodities.
The UK Sterling
Prior to the Bank Charter Act of 1844, banks in the UK and its territories were free to produce their own individual bank notes. The creation of the Act limited this, ensuring that the Bank of England gained a virtual monopoly on the production of bank notes in the UK.
Whilst other banks, banks including those in Scotland and Northern Ireland, continue to produce their own notes. They do so under the agreement with the Bank of England that these notes are back by a real pound held in the BOE. These notes are not always accepted in FX transactions worldwide.
Sometime around the 19thcentury, the Bank of England became the centre of the global financial system, with the pound sterling reigning as “the most steadfast and important currency in the world” according to financial writer Jack Weatherford.
In 1971, the UK went decimal, ringing in a new era in currency, with shillings, farthings, and halfpennies becoming almost a thing of the past. But, they’re not completely forgotten. Ever wondered were the terms ‘bob’ and ‘quid’ come from?
- 20 shillings in £1 – a shilling was called a ‘bob’
- halfpenny (pronounced hay-pony) was 1/2 of a penny
- £1 coin was called a Sovereign and was made of gold. A paper pound was called a ‘quid’
Cross-border currency: Euros
When the Euro was introduced on January 1, 1999, it was not the first currency to be a cross-border currency. However, its arrival created waves across Europe and FX markets.
Purported to create ease of trade and travel, among other reasons, the Euro was originally met with skepticism. This was especially so, in Germany, that held a strong attachment to the Deutschemark.
Currently, the Euro is accepted in 19 of the 28 EU member states, collectively known as the Eurozone. Additionally, it serves as an unofficial currency in a number of other countries.
Digital currency revolution
The world has gone digital and so has currency, marking the beginning of the Bitcoin history of Money. Established in 2009, Bitcoin represents one of the best-known cryptocurrencies. In general, cryptocurrency technology is new and little understood. It has been met with much enthusiasm but also distrust. Some investment advisers hark back to the adage ‘if you do not understand something, don’t buy it.’
This article "Bartering to Bitcoin History of Money was written by analysts at Capital.com.
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