Evolution of money (Barter system to Cryptocurrency)

The basic needs of humans comprise of Food, Shelter, Clothing, education, and the newly added internet. But all these can be achieved only by money, making it the most basic need for any human.

But how much we know about money? How did it begin? Why did it begin?

Here is a piece of detailed information about the evolution of money from the very beginning to the new age of Fiat money and the recent cryptocurrency.

Let's begin with the usual!

Facts about money

  • Germans used money as wallpaper during post world war-1 due to hyperinflation which wreaked havoc on the German currency, causing it to lose almost all of its value.

  • The International Space Station is the most expensive object ever built, at US$150 billion.

  • Drug lord Pablo Escobar had so much cash that rats ate almost $1 billion of his money each year. And he spent nearly $2,500 a month in rubber bands to hold all of his money.

  • Until the WW2, tea bricks were used as money in Siberia.

Inflation- Huge pile of money with less value
  • Back in 2008, the worst hyperinflation hit Zimbabwe. At its peak, a single U.S. Dollar was worth 2,621,984,228 Zimbabwe Dollars.

  • The total amount of money owed by every single person and country in the world is US$199 trillion, but the world has only US$80.9 trillion in cash and bank deposits.

  • The first transaction of Bitcoins was to buy pizza for 10,000 Bitcoins, which later increased in value to over US$12 million.

First-generation money (Barter System)

As we already know, we evolved from monkeys. But those early humans never needed anything to buy as they didn't have 16-inch pizzas nor have Oscars to wear $2.1 million worth earrings as Scarlett Johansson. Their needs were very limited to fruits, herbs for eating and animal skin for clothing.

Later, they started forming groups as they started traveling. This formation of groups added a need for them to trade. This trade was again limited to clothes and food.

But after the nomadic age, they started settling down and were left with lots of free time which they utilized for crafting, carpentry, weaving, etc.

These skills/services and the products created a demand which made the people without them want or needed to buy them. They started exchanging surplus goods for goods or services they needed. For eg- A cow for a sack of grains.

This resulted in the first-generation money system called the Barter System. The barter system ceased from existence a while ago, but an organized form of bartering became popular in the 1930s during the Great Depression.

Second-Generation money (Metallic money)

As time elapsed, the Barter system evolved. People started facing problems as services, goods, and population grew day by day. This resulted in them finding a standard solution for all the goods and services.

The solution was setting a reference to all the services and goods. These references were generally the rarest/valuable goods of those times. They were sometimes shells, leather, cattle, and wampum.

This reference system laid the foundation for modern money. The Chinese first manufactured coins made from base metals in 1000BC. These coins were laid as reference for the goods or services and are similar to modern money.

Later, back in 600BC by King Alyattes in Lydia, now part of Turkey, the coins were made of gold or silver to add intrinsic value to them.

Third-Generation money (paper money)

As mentioned earlier that people used leather as a reference, this leather is considered as the first kind of paper money.

In 100's BC, one-square-foot pieces of white deerskin with colorful borders were considered as currency in China.

It nearly took another millennium for the modern-day banknotes to become common. And the current modern-day banknotes which have no intrinsic value and are governed by the government is called Fiat money.

The value of the Fiat money of a country globally depends on its stock market and the higher production of Fiat money will result in Hyperinflation.

Fourth-Generation money (plastic money)

These are the plastic cards we use daily and occupy most of our physical wallets. They are of different types; debit cards, credit cards, store cards, pre-paid cash cards, etc.

The first type of plastic money dates back to the early 1900s where charge cards were already in circulation, but it was in 1946, 'Charg-it', invented by John Biggins, a banker in Brooklyn became the first bank card.

The diners club card initiated the concept of credit card, but the international credit card of American Express in 1958 became well known to the world.

But all these cards are far different from today's debit and credit cards. They didn't have magstripe!! Even though the technology existed back in the 1960s, the main problem was permanently attaching the stripe to the card without wrinkles. While working on this problem, Forest Perry came home from work to find his wife ironing his clothes. When he mentioned the problem with the stripe, Forest’s wife asked to see the prototype card. Using the iron, she managed to melt the stripe to the card wrinkle-free. This solved the entire problem, which allowed IBM to go into full production with the Mag Stripe on all their cards.

Soon, ATMs, Visa, Mastercard, etc ruled the world and just recently, all the cards started getting chips and pin as mandatory.

Fifth-generation money (E-money)

Earlier, who would have thought that we will no longer use the traditional banknotes to pay at the mart? And the money is paid on the go through our mobiles?

The result of this unique thought resulted in this future currency, no, the current currency, E-Money.

E-money has a wide variety of definitions and to date it back, the first official report of accepting it was published by the European Monetary Institute (EMI), the predecessor of the European Central Bank in 1994.

Later in 1999, the popular Paypal entered the market and soon, it established its foundation in the e-money industry.

Sixth-Generation money (Cryptocurrency)

And by 2008, the futuristic money, the 'Bitcoin', began with the Bitcoin whitepaper publishing on Oct 31 by the mystery man Satoshi Nakamoto. And on Jan 12, 2009, the first Bitcoin transaction was made to buy a pizza.

Understanding the Bitcoin is a bit hectic and most people without proper knowledge are scammed in various ways, which even include the scammers pretending to be the mysterious Satoshi Nakamoto, and coaxing the people to trust them.

However the benefits from the Bitcoins are numerous; like it is super-super safe and impossible to crack, it functions completely on mathematics, the transaction fee is very cheap, it is completely digital money without any physical form, it is completely transparent and everyone can see all the transactions, it doesn't require your personal information, it can work just with internet and isn't governed by any government, and many more.

You can’t stop things like Bitcoin. It will be everywhere and the world will have to readjust. World governments will have to readjust”–John McAfee, Founder of McAfee
Cryptography ensures authorization. You need a private key to transact. And your key is complex enough that it would take the best computer longer than the earth has existed to crack it. In other words, it’s essentially unhackable. – Director of Communications at Overstock.com and Chief Evangelist at t0.com
“We have elected to put our money and faith in a mathematical framework that is free of politics and human error.”–Tyler Winklevoss, Co-creator of Facebook
"Bitcoin will do to banks what email did to the postal industry.” - Rick Falkvinge, Founder of the Swedish Pirate Party.

Maybe because of its limitless advantages, the Bitcoin users are increasing day by day as well as the transactions. Here is the last 24 hours statistics regarding bitcoins-

Some interesting things to know

  1. Emerich Juettner, the great counterfeiter was horrible at counterfeiting. He was so horrible that he misspelled the then-president name as 'Whasington' on the banknotes. But he was too smart at spending the fake bills that the court decided to punish him for only 4 months even when he faced 3 courts with each bearing 10-year sentences. And he was made to pay a penalty of $1 even though the government spent a fortune in finding them.

This was the conversation happened when the secret service questioned the 73-year old Juetter-

“How long have you been making these bills?” “Oh, 9 or 10 years — a long time.” “You admit it?” “Of course I admit it. They were only $1 bills. I never gave more than one of them to any one person, so nobody ever lost more than $1.”

This simple conversation would explain the reason behind the mysterious court decision.

2. There can be only 21 million bitcoins to be mined until 2040 to prevent inflation.

A blog by the author of God’s Chess novel series Pabba Abhishek, aka Writer of God. You can find his other blogs in mediamug.in. You can find his other blogs on this website writerofgod.com.

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