FROM BARTER TO BITCOIN – (PART II: Currency)

The barter system did not succeed due to its problematic nature: the exchange of larger goods was difficult, there was no standard value, the subdivision of goods was impossible and information was not easily accessible. Barter system was no longer a sustainable option for conducting exchanges.

To address these issues we humans introduced currency. This made the process of valuing goods ‘standardised’, which is something agreed upon by everyone. Interestingly, according to historians, hieroglyphics from the past show that people had disagreements about conducting trade through barter. Moreover, as international trade continued to flourish and the magnitude of exchanges increased, a currency became necessary

Before metal coins, other forms such as Cowry shells, Whale Teeth, Feathers were used in various parts of the world. All these forms were easily available – making them easily accessible for anyone – but inconvenient to carry around. In reality, these forms did not successfully address the issues associated with barter. Furthermore, all of these forms were not actually rare. Therefore, they actually weren’t valuable. Imagine that you lived in a time and place where feathers were the standardised currency. All you’d have to do was go under a tree full of birds. Pick any fallen feathers. Go to the person who is selling the product you need and give the feathers to the seller in exchange. This shows how the currency was easily accessible to everyone. As a result, a more viable option to conduct transactions had to be introduced.

Keeping in mind that a currency had to be rare, or valuable, another form of currency emerged: metal coins. Based on value, gold, silver and bronze coins were first introduced in 3000 B.C and stayed for thousands of years. It is difficult to contribute the innovation of metal coins to just one region of the world. However, it is believed by many that metal coins as a currency first emerged, during 600 B.C, in Lydia, which is present-day Turkey. Although metal coins were first introduced here, evidence of metal money can also be seen in China’s Zhou Dynasty where they made replicas of cowry shells. 

Obviously just like other currencies, metal coins came with issues. Firstly, anyone could trick sellers with metal coins. At that time, people estimated the value of coins based on their weight and how precious the metal was. Of course, gold would have much greater value than bronze. A person could easily change the composition and weight of a coin. A cheap metal could just be coated with gold to make it valuable. This would allow a person to make unfair profits. Secondly, being heavy, metal coins were again inconvenient to carry. In Sweden, there was a 20 kg bronze coin that was produced in 1645. This was obviously troublesome. This is why we do not have precious metals as coins today.

https://images.app.goo.gl/VdSwmxzXjcxzq5Ub7                          https://images.app.goo.gl/Nn38MS2H3PpwZQUD7

Finally, paper money or fiat money emerged in 1189 AD. This currency is still used today. We will discuss more on this in the next blog post.

Reference: 

https://www.britannica.com/video/187664/history-money

https://link.springer.com/chapter/10.1007/978-3-030-10689-8_2

BARTER TO BITCOIN: PART 3

Fiat money

Decentralised money