Money is a powerful economic and financial tool that has evolved together with our civilization from its most primitive moment to our day, therefore, we invite you to know it and be able to identify how money has completely changed our history.
LContrary to what many may think, the euro, dollars or yen, are a type of money that has very few years of life. In fact, they are all a type of money known as "Fiat" or fiduciary, officially born in 1971, which is not backed by gold or anything else, it is simply paper or digits on a computer.
In fact, due to this, it is normal to see how many people believe in money in the wrong way, since we are not educated to understand what money is, its origin and evolution. And all this leads us to believe that we were born with a type of money that has always existed, and in the same way.
The origins of money are as old as the history of humanity itself, but the first human economic exchanges are far from the current reality. And in the midst of all this, the evolution of money has played an important role. From barter, the appearance of the first currencies, the arrival of current fiat money to Bitcoin and digital currencies. Undoubtedly, a whole path full of advances and great evolutionary leaps of money, its form, utility and scope.
In this new Bit2Me Academy article, we will tell you about the history of money. A journey that will take you to know its beginnings, facets and how the evolution of money has led us to the appearance of Bitcoin, the money of the future.
What is money
We will start with this definition and then continue with its story. The best way to define money would be the following:
Money is a language, a way of expressing value in order to carry out exchanges of goods and services between human beings. It is a belief, a technology developed to be able to trade and store value over time.
Maybe some word has sounded controversial to you, but read on. Now we will go on to understand its origin and evolution.
The beginning of the history of money
As we have already mentioned, the origin of money dates back thousands of years. The fact that the human being began to live in society brought with it the division of labor, making people not self-sufficient and generating the need to want things that other people had. This led him to create exchange mechanisms which we will begin to highlight below:
Barter, the first form of money
Surely you have heard of barter, that system of economic exchange, in which you offer merchandise, products and services, to acquire other merchandise, products and services that you want. This is the most basic form of money, but also the least similar to what we know and use regularly today, as well as the most complicated to apply. But at the end of the day a way to exchange value. In addition, there are indications that barter dates from the Paleolithic era, that is, about 15.000 BC, conforming the appearance of the first form of exchange of value or money.
The idea of exchanging a product like salt for copper, or hides for wheat, was theoretically simple when bartering appeared in human history. But the truth is that this type of exchange is difficult to perform. Especially since the parties in a barter sought to position the best possible exchange for their products. The well-known "haggling" was born with the first barter and with it its long history.
But also, a somewhat fair situation, it ended up becoming one full of unfair exchanges. Especially because there were relationships or power differences between the parties, or because the good exchanged was complex to store, transport and negotiate in other spaces. All of this makes bartering a very inefficient and unfair form of money.
Barter at the dawn of human history
However, this first form of money was what initially allowed us as a human species to build trade bridges with other regions.
In fact, one of the earliest evidence of barter comes from regions of the Middle East, where around 12.500 BC, the Anatolian obsidian as an exchange system. Obsidian was used as a raw material for making tools in the Stone Age and was also used at that time as a form of money. Later, in the year 9.000 BC, grain, animals and even salt began to be used by some regions, as other forms of money. In fact, the curious fact about the use of salt as a form of money is that the word Salary, derives precisely from the use of this as money.
We know this thanks to the first written stories of barter that were given by the Sumerian civilization. The Sumerians, who began to write their history around 6.000 BC, left us a long legacy, including the use of barter as a means of exchange of value.
In fact, the Sumerians were the greatest economic and development power in the known world. From its inhabitants came inventions such as the wheel, the beginning of work with copper, bronze, gold and silver, writing and trade with other nations. This led to the creation of the first commercial records, the first purchase contracts, and the first evidence of man's written history.
Later, the Phoenicians, another great ancient civilization, would create the mute barter. This was just an improvement on the Sumerian concept, which set aside even the usual injustice that could exist in an exchange. To do this, the Phoenicians simply left their goods on the shores and returned to their ships. With this, people in the vicinity could approach and offer an exchange. If the Phoenicians agreed with it, they let the merchandise be taken away, or else they would withdraw it and wait for another offer.
However, this was not enough, sometimes the livestock, seeds or goods exchanged were not of sufficient quality. For example, cattle died or were sick, or the seeds were of poor quality and turned bad. It is here where some of the pillars begin to be defined "Of good money", such as durability. To correct these problems, again, humanity takes a next leap by selecting some metals such as gold, silver and copper as optimal goods to function as money. This is how in Mesopotamia, around 2500 BC. C. begins to have evidence of the precious metals used as money.
The next important leap that money takes is with the arrival of minted coins, a concept that might seem similar to what we use today, but no, because these coins were made of precious metals.
The first coins minted date back to around 600 BC, in three places on the planet independently: in Lydia (Asia Minor), in China and in India. The metal was cut into small portions and marked with an identifying mark, creating the coin that has the specific function of serving as money.
In fact, this form of money spread throughout the world, even in places as remote and closed as Japan, where in feudal times there were coins, and yet the most common form for large exchanges was bales of rice. In Europe, for example, gold, silver and pepper were widely used. Spices were part of the desired forms of exchange of European peoples with other peoples for a long time.
Despite its very ancient origin, bartering has been widely used in modern times. The renowned economist Adam Smith devoted much study to this type of exchange. In this he made it clear that barter is a form of exchange full of inequality, although necessary in the first moments of human development, thereby creating concepts such as wealth, surpluses, economic exchange and private property.
Today, there are many people who still use bartering as a valid form of exchange. The well-known flea markets are spaces where bartering is a valid payment option, if the parties consent to it. Even on the Internet, sites like MercadoLibre or eBay, it is quite common to see barter offers in order to acquire goods that are not had.
This is especially true in countries where there are deflationary spirals, or uncontrolled hyperinflations. Cases such as Venezuela, Argentina or Zimbabwe are examples of these cases, but in countries such as the United States, the United Kingdom and Spain, this type of exchange is also used. What it tells us, that despite being the oldest form of money, its use is still valid.
The arrival of coins, the first money revolution
However, the difficulty of bartering for small value exchanges began to engage human inventiveness. As a result of this, around 700 BC, the first coins began to be minted. A small town named Lidia, is the one who so far has the oldest archaeological evidence of the first coins in the world.
Later, with the conquest of Lydia by the Persians, they began to mint coins and from there the expansion of coins in the world began to grow. Peoples such as the Greeks, Romans, and the Chinese, served as the epicenter for their neighbors and peoples under their rule to use coins as a system of exchange.
These early coins were generally made of precious metals. The Lydians minted their coins in gold and silver, weighing from about 4 grams to 60 grams. All this depending on the quality of the material, the alloy and the size of the minted coin.
The expansion of currencies in the world
Currencies quickly became a highly desired medium of exchange. These greatly simplified the purchasing process and set aside certain injustices that bartering used to have. This is because the value of the coin was in its mintage and the value of a material whose work was difficult to perform.
On the other hand, the appearance of coins also made it possible to create the first anchoring patterns. A gold coin could be used by a king to order the minting of a certain quantity of copper or even wooden coins. Thus was born the concept that we could protect value and use other representations of money to mobilize value.
In Europe, for example, Roman coins marked the evolutionary point of the coins that would later be used by the peoples of these regions until today. While in China, its currencies would do the same with peoples of what is today India, Japan and the rest of the Asian continent.
But despite all the antiquity behind it, currencies today are still a widely used medium of exchange. Its practicality makes it perfect for those small exchanges where gold, silver or other metals are not practical. And although these coins were originally made of precious metals, the concept of anchoring evolved to transform the coins into alloys with little value or cost to produce, compared to their exchange value.
The origin of today's money
Although the concept of banks dates back to the very principles of money as such, in Mesopotamian times, making loans with interest, it is especially in the Middle Ages where they have a fundamental role in the evolution of money with the birth of paper money in Europe. While it is true that paper money was attributed to China in the XNUMXth century, with the voyage of the Venetian Marco Polo in the XNUMXth century this tool began to be known outside of China.
It would take centuries to actually be used in Europe. In the modern sense of the term, banking had its beginnings in the wealthy cities of northern Italy, such as Florence, Venice, and Genoa, in the late medieval and early Renaissance periods. The Bardi and Peruzzi families dominated banking in XNUMXth century Florence and established branches in many other parts of Europe.Perhaps the most famous Italian bank was the Medici, founded by Juan de Medici.
The first banknotes of which there is evidence appear in Sweden in the year 1661 (XNUMXth century), by the hand of the money changer Johan palmstruch, who gave them as a "receipt" for those who deposited gold or other precious metal in the Bank of Stockholm, founded by himself.
This is where gold backed paper money is born. That is, people's gold coins, which were heavy and difficult to divide, are kept in highly protected safes, in exchange for papers that indicated something like "This document is equivalent to so much gold in bank X".
Little by little the bankers realized that few people came to claim the gold, people felt comfortable trusting the bankers and using papers. Given this situation, the bankers began to lend the gold to other people, receiving an interest for it.
Everything was going smoothly until 1660 when the King Carlos X Gustavo, died and the government decided to mint new copper ingots of less purity. Depositors flocked to withdraw their highest purity copper bullion (which is called Gresham's law, when there are two coins in circulation, people keep the good and use the bad), but since Palmstruch had loaned them, they did not there were enough. For this reason, in 1661 the ingenious Palmstruch decided to decouple the issuance of the "notes" with the deposits in such a way that the only guarantor of the notes was the bank itself. These bills were the Kreditivsedlar and they covertly represent the birth of fiat money (which is backed only by faith or trust).
It seems that Palmstruch had succeeded, but he did not count on the fact that this money generated a new phenomenon in Sweden: inflation. After a turbulent period of economic crisis, there came a time in 1667 when the bank, unable to honor the commitments derived from the Kreditivsedlar, went bankrupt. Palmstruch was initially sentenced to death, although he was later pardoned and ended up in prison.
But the Swedish Parliament had sensed the power of the bank and decided to found the first central bank in history: the Swedish State Bank in 1668, with exclusivity of banknotes. This institution would change its name years later to be renamed the Central Bank of Sweden, which in 2018 celebrated its 350-year history as the oldest in the world. It was not until 26 years later, in 1694, that the Bank of England was created, the central bank that has served as a model for most of the world's central banks.
In other words, the creation of paper money was privatized and institutionalized in governments, taking away the ability to issue money to anyone. Only the central bank of a country would have the ability to issue valid money, truly caring that the gold backing the banknotes existed.
But central banks could not bear that promise for long either.
Until not long ago, banknotes were still backed by gold, which was known as the gold standard, that is, each issue of money made by the authorities of a country had to be backed by a certain amount of gold. This continued until the 1970s or so, when the United States officially ended that promise, ceasing to use gold as a backing for the currency in 1971.
Although there are those who think that euros or dollars are backed by gold, this is not the case. Money as we know it today is not backed by anything, being issued by the central bank of the place, who from its position of power determines that this is the money that people should use.
Fiat money, uncontrolled issuance, and loss of purchasing power
The arrival of the Bretton Woods Accords changed everything. From then on, fiat money became the new standard of money. Money without its own value, but that has legal value. These actions, which should have resulted in a higher level of wealth for all, in the end led to the beginning of serious economic imbalances throughout the world.
The central banks of many nations began to issue money without control and we were faced with the first problems of aggravated devaluation of purchasing power. Even the dollar itself, the standard currency, faces this reality. To the point where $ 100 in 1956 would be the equivalent of $ 956 today.
This problem along with other unhealthy practices in economics are what have led us to economic crises such as those of 2008. Faced with this reality, the need for a new type of money, one that was not controlled by governments and central banks to make us more poor, it was necessary. No one would think that would come true, in 2009 with the launch of the new evolution of money.
How much do you know, cryptonuta?
Is the creation of current money one of the main causes of the economic disasters suffered today?
The generation of fiat money, whose value is not tied to anything tangible, just a political promise broken multiple times, is the main cause of some of the largest economic and financial disasters in history. The ability for countries to print as much money as they want, leads to unreal spending, which is often diluted in corruption, senseless spending, and that in the end, citizens pay with our taxes. In the end, that money printing machine safely generates only one thing: economic chaos.
The birth of Bitcoin, a decentralized, private and secure money
The birth of Bitcoin January 3, 2009, represents the greatest evolution of money to date. We have always seen money as something physical, tangible, but Bitcoin changed all that. And, although we have had digital money for a long time (in our bank accounts or systems like PayPal) the truth is that these systems were just one more representation of the same model, of the fiat money that we were already used to seeing.
Bitcoin on the other hand is something totally new. A system whose value is given by the work put into generating and making the system work, in addition to the trust and the dynamics of supply and demand that its users impose. In other words, there are no central banks here, there is no government that controls it. Bitcoin is autonomous in every way.
Since then, we are facing a new money revolution and we are privileged to live it. For several millennia, money was something tangible and now we have transformed it into a digital entity in which there are no borders or limits on what we can do with it. Anyone would think that it is a matter of passing fad, but now even central banks themselves have understood their mistake by rejecting technology and remaining stuck in obtuse systems. The central bank digital currencies (CBDC) They are a means to digitize money supported by technology such as the blockchain. But despite this, it is still fiat money, controlled at the mercy of global elites. On the other hand, Bitcoin is absolute freedom, the spirit of anarcho-capitalism come true, it is the spirit of the cypherpunks, the one that encourages you to respect your privacy at all times and make money that is fair, transparent and democratic.
At this point ask yourself seriously: Which one do you choose?