Evolution of money

Nowadays it is difficult to imagine a life without money. And no matter if we like the rustle of cash in our hands or we are used to paying by phone or watch, the future of payments is just around the corner.

The payment history is as long as the history of mankind. At the beginning, the most popular was barter — the exchange of an item / service for another item / service — cashless transactions. However, this system was highly impractical and cumbersome. First of all, the problem was the replacement of products of inadequate value. So there was a need to find goods that would be divisible, persistent and rare. Leathers, salt, tools, grain, cattle and ores became such commodities. They were the first legal tender.

With the development of civilization, consumption, and rapidly expanding trade, “commodity money” has proved to be impractical. It was again difficult to settle accounts, but also with the transport itself. And here money appears in the form we know and much closer to us. It is about metal money — initially as pieces cast from base metals, i.e. iron, bronze and copper, and then metal money, minted. The latter are in the form of coins with signs confirming the value of the alloy (gold, silver, platinum).

When the production of krill coins turned out to be too expensive and the rate of extraction of precious metals was not able to meet the constantly growing market needs, the solution turned out to be the deposit receipts. The coins were left with goldsmiths, who in return issued a document with information on how much gold and silver were owned by the bearer. This is how the era of paper money began. Moreover, new forms of trading in such receipts have emerged. For example, goldsmiths issued such receipts that were not covered with ore and were indebted to the person issuing the receipt. Such receipts generated interest. It can be assumed that at that time the first deposits and loans appeared, and thus the beginnings of banking.

The banknotes that we know today are derived from the depository receipts. They were created by government ordinances and became legal tender. First, they appeared in China, and in Europe, Sweden and England were the precursors of the use of banknotes. Paper money is closely related to governments and is subject to control. They are also exposed to inflation and thus lose their value.

The emergence of electronic money was a natural consequence of universal Internet access. So we have the option of making electronic bank transfers, and making magnetic card payments linked to an electronic bank account. It is hard to imagine at this stage that we would give up on it if paying with a card or a watch is so convenient and common.

And yet the future is here. In order to avoid centralization, inflation or to protect its assets against theft, the first cryptocurrency — Bitcoin was created in 2009.

Cryptocurrencies use cryptography to secure and verify transactions. They are an alternative to standard currencies. However, they do not have a physical form and yet they are becoming legal tender in more and more countries. Perhaps this is due to the fact that both cryptocurrencies and traditional money are not covered in gold as it used to be, and their value is primarily the amount of trust of the community in the issuer of a given currency.

It is said that the future of cryptocurrencies is that many different currencies are used in parallel and it is only a matter of time before they come into circulation. However, we are still waiting for legal regulations, but also for the appropriate infrastructure.