The History of Money: From Barter to Crypto
Did you know chocolate was an official currency for the Mayan civilization?
Before cash and credit cards, before the swarm of questions regarding cryptocurrency, even prior to gold, mankind had already created the economy.
In fact, the history of money starts as early as 3000 BCE when the Sumerians developed the Shekel, replacing barter for good.
From Barter to Money
Bartering refers to direct trade, like exchanging wool for milk. In ancient times, direct trading was a sensible economic structure. Yet, as communities grew, bartering's limitations began to show. Direct trading meant you could only acquire milk when the cow owner needed wool and vice versa.
Stones, feathers and animal teeth began circulating as IOUs (etymology: “I owe you”), the first forms of money. This allowed people within the same community to trade with an intermediary item that could be reused by the next person, exactly like how we use money today.
As with bartering, these IOUs died at the hands of their own shortcomings. While they worked well for small communities that could keep track of their debt, unregulated objects didn't work for trading with other communities who relied on different objects for commerce.
The Arrival of Gold
Money needed to become standardized. It needed to be represented by something divisible, portable and durable. And thus, the gold standard was born.
Gold was scarce enough that people wouldn't be acquiring lumps of it during their evening stroll, and it was malleable enough to be shaped into ingots and coins. The latter would be stamped with a legitimizing image (usually of a monarch) that would further prevent forgery.
For a long time, however, coins have been made from metals like nickel, aluminum and copper because the value of gold exceeds the face value of the coin.
Making it Rain
Paper money first appeared in 7th-century China in the shape of notes. They were circulated by the Tang Dynasty in lieu of gold. "Flying money" traveled better than heavy coins, but it was easily blown away on a windy day.
Credit Cards? A Medieval Invention
The second millennium saw the beginning of credit cards. Instead of cards, medieval merchants carried around sticks marked with tallies. These tallies worked like IOUs, with two pieces of the same stick serving as a receipt for both parties involved.
Governments even started using the sticks to collect taxes. The system was so popular that, when England finally decided to stop using them, burning the leftovers resulted in the worst fire London had ever seen.
The first banks began in ancient Rome and Greece, the name itself coming from the Latin word for bench. Citizens could acquire loans from the creditors who sat at these benches in exchange for an interest rate. If a creditor miscalculated his finances, his bench would be broken so he wouldn't be able to sit anymore, hence bankruptcy.
Another idea for banks came from citizens storing their valuables—like gold—in regulated vaults in exchange for a kind of receipt accrediting their ownership of said goods. From there, banks evolved into the massive systems that they are today.
Packing Plastic and Digital Money
The credit card as we know it began circulating in the 1950s. The first credit card was similar to what we know today as gift cards, designed to be used at a specific store or location. Eventually, the card expanded into a form of digital currency that could be used at any commerce.
The credit and debit payment cards are now governed by the EMV, a global standard for chip card technology. The name EMV comes from the leading credit card technology providers at the time of inception: Europay, Mastercard and Visa.
The credit card's latest iteration is the mobile wallet, apps developed to accommodate for the rise of smartphones. These allow its users to pay for goods and services by scanning their phones as opposed to physical cards.
The Future of Money
Now that everything is going digital, people have begun to question if money should be tethered to concrete government systems or subjectively valued gold.
The financial landscape is changing as people get used to mobile wallets, online payments and cryptocurrency. And, who knows? Banks and government institutions might even end up normalizing and regulating digital currencies.
Our world is in constant technological flux, but 2.5 billion people still don’t have a basic financial identity. At Ria, our priority is to keep catering to the needs of those who still rely heavily on cash to send their family remittances, while also offering other payment solutions that are in line with new financial and digital trends.