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Friday, August 9, 2019
A Brief History of Money: From Hunting-Gathering To Cryptocurrencies
People have always desired to exchange the end results of their labor with one another. In prehistoric ages, early people were grouped into small tribes that roamed the land for resources. In order to survive, prehistoric people were hunter-gatherers where their main focus in life was to gather food, water, and other essential resources. Many prehistoric cave drawings depict this kind of lifestyle — drawings show early humans hunting all sorts of animals to survive (Figure 1).
Figure 1: A prehistoric cave painting showing people hunting what appears to be some deer.
During these prehistoric times, the concept of “money” did not yet exist. Members of the tribe simply worked all day gathering and crafting the materials they needed to survive and then would share the results of their labor with their fellow tribesmen (Figure 2). This communal sharing of gathered resources was easy to manage because people were grouped into small tribes so it was easy to see who was responsible for gathering a specific resource.
Figure 2: An illustration depicting early tribal life.
The Agricultural Revolution Began
Figure 3: An illustration of farmers in an agricultural settlement.
As the human population grew, people became more aware of how to grow crops and domesticate animals as a good source of food — an agricultural revolution occurred (Figure 3). People began to settle down in small communities of farmers, hunters, fishermen, miners, and craftsmen. It was during this age when the very first markets started to appear. Initially, the very first markets used a simple barter system, whereby people could exchange the results of their labor with one another. For example, a hunter could exchange 3 deer he caught with a miner that extracted 3 iron ores from the ground. However, as these settlements grew, managing these types of trades became increasingly more difficult because the coincidence of wants was also increasing in complexity. An intermediary form of exchange had to be used, thus the first commodity based “money” was invented.
Commodity Based Money Became Popular
Figure 4: Ancient Roman gold and silver coins.
Throughout the ages, there have been many types of commodity based money. People have used anything from seashells, rocks, feather, furs, and many more types of commodities. Ultimately, people discovered that precious metals such as gold ad silver worked well as commodity based money for many reasons. First of all, gold is an inert metal so it doesn’t react with other elements and doesn’t decay, rust, either. Precious metals such as gold and silver also have many other properties such as being portable, durable, divisible and are interchangeable so they are the perfect store of value. For over five thousand years, the most recognized form of money was based on bimetallism — mostly gold and silver in the form of coins (Figure 4).
Paper Based Money Was Invented
Figure 5: One of the very first printing presses invented by the ancient Chinese.
The major problem with using gold and silver coins for trade and barter is that carrying large amounts of metal coins are heavy and cumbersome to bear. As a solution, the ancient Chinese around the 11th century created the first paper receipts for metal coins that were deposited into storage vaults. Hence, the very first paper based currency came in existence and the first gold standard came to be. Throughout the centuries, there have been many different types of paper based currency (Figure 6).
Figure 6: Examples of different paper, “fiat”, based currency.
The Digital Age Started
Figure 7: Popular credit cards such as Visa, Mastercard and American Express.
In the late 20th century the digital age started and money itself had to be represented in a digital form too. Therefore, checks, bank wires, and credit cards appeared (Figure 7). As E-commerce emerged, online versions of money had to be readily accessible as well as demonstrated by online banking, PayPal, Gcash, Pay Maya, etc. Currently, we are in a collaborative sharing age as is exemplified with the rise of peer-to-peer (P2P) based services such as Grab and Airbnb. Money itself is becoming P2P as well. P2P cryptocurrencies such as Bitcoin, Ethereum, Litecoin, and others are the expected future evolution of money (Figure 8).
Cryptocurrencies Are The Future Evolution of Money
Figure 8: Icons of popular cryptocurrencies.
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