Did you know in the old days people could buy a sheep for a few sacks of rice? History then thankfully evolved giving us ‘money’ and ‘currency’ which made transactions ever so smooth. The history of money, although very old and spread across the world, is an interesting one. It tells us how humans decided to use money or something similar to exchange goods and the current form that exists today.
The concept of money is any object that is given a certain value and can be exchanged for goods, commodities or services. It is us humans that give it value and we decide what is worth how much. In other words, the value of money is imaginative.
History of Barter
Money was used as far as 3000 years ago and before that the barter system was used to exchange goods such as rice or wheat for cows and sheep.
The barter system was the first system in which a mutually beneficial deal was done to exchange one good for another. Say if I was a wheat farmer looking for a cow and you were a cow herder looking for wheat grains then we could make a deal to exchange some bags of wheat for a cow. This way we both benefit from each other.
This however, was not the best way as people slowly figured out as there was no standard measure of scale. It means that people could ask for whatever they wanted in exchange and sometimes that was not acceptable. Moreover, it was not always possible to find exactly what you were looking for in exchange for what you had to offer. Although people later had started trading animal skins, salts and weapons like spears and axes.
Birth of Currency
These were some of the earliest currencies that we know of. Even to this day, exchange of goods is seen as a way of making connections and bonds. In festivals and special occasions, we still exchange gifts with each other as a show of friendship. From there on, humans gradually moved to metals.
It is fascinating that from the beginning, different kinds of metals have been used as currencies, from copper to gold. Most civilisations started using durable materials and then eventually moved to rare and precious metals like gold. The main reason why metals were used as currency was because they were hard, solid and durable. That means that they could last longer than other things like bread that go bad very soon. They were small and easy to carry too, which meant that currency became easy to carry long distances.
The origin of metal currency is believed to be in Turkey around 2700 BC. These were the first circular metal discs that people used for the first time as currency. However, the first proper use of coins was in China in around 700 BC.
These discs were usually made out of a mix of silver and gold. A stamp on these coins signified their value. It would usually be an animal like a bird or maybe a series of shapes such as arrows.
Here’s an interesting fact:
Some coins had a hole in the middle so that people could put a string through them and wear it as a necklace around their neck.
From Turkey, Greece started following suit and created coins as a medium of exchange.From there, the Romans started using images of their buildings and leaders on the coins. This continued for the next 200 years or so until materials such as paper and cloth came into use.
Using Paper as Currency
China is credited as the first country to use paper as a currency. The first instances of paper being used as currency can be seen at around 7th century AD. People would deposit coins and have that value written on paper, which they could take with them as proof of owning copper coins. However, there came a time when copper was so in use that an acute shortage of copper compelled people to think beyond metal coins. It is important to note that paper was not always the medium either. It varied from cloth to leather. The best evidence of this can be seen in the writings of travellers who travelled along the silk route to China and
From there on, paper as a currency evolved with the arrival of the banking system.
The earliest forms of banks included a paper note on which details of the amount to be paid were written. This was the earliest form of a modern day cheque.
In modern times, each country has their own currency that they exchange for goods. Although coins are also used, paper currency is more prevalent. This brings us to the current situation where although paper currency is still dominant, another form has started to emerge over the last 20 years.
Digital payments through the internet and mobile applications are highly popular in the 21st century. Paper currency, although still the primary currency, may soon be replaced by digital currencies where people do not have to carry any kind of physical cash.