Bartering to Bitcoins: How We've Paid Through History
A new alternative currency inspired by singer Kayne West is set to launch this week. Dubbed the Coinye West, the digital form of money enters the emerging and unsteady market of online currencies.
Bitcoin, easily the most well known digital currency, has seen its popularity grow along with its fortune, as what was once a small user base transformed into a global market that makes headline news. Whatever the fortunes of the Coinye West, or any other cryptocurrencies promising a new way to pay, electronic payments are the future of money, a major shift from thousands of years of history that relied on tangible currency instead of virtual.
Bartering is inefficient, however, requiring the right parties to first come together and then agree upon an exchange.
In a complex economy, currency is a commodity that serves as a unit of exchange and a store of value.
In Mesopotamia 5,000 years ago, money makes its first appearance in written history in the form of a shekel, originally a unit of weight for a fixed quantity of barley.
Around the late Bronze Age, in ancient Egypt and other parts of Mediterranean, people used metal rings and ingots made of copper or tin as a means of facilitating trade.
Shells as a form of currency were first used in China around 3,500 years ago, though developed independently by other cultures in Asia and Africa. Cowry shells, from the sea snail appropriate named Cypraea moneta, were among the most common form of shells used as currency.
King Alyattes of Lydia is credited with minting the first coins made of precious metals. Tracing back to the 7th century B.C, Alyattes' innovation was not that the coins were made of gold or silver, but that they were minted with a standard size and weight.
Lydia's system of monetization quickly caught on with its trading partners and beyond around the Mediterranean. Coins would be minted to include symbols or pictures of mythological figures or rulers, providing insight into their cultural origins.
First introduced in China in the ninth century during the Tang Dynasty, paper banknotes then were essentially certificates of deposit that could be exchanged. Unlike coins made from precious metals, which were valuable all by themselves, paper money promised value, in that while the notes themselves didn't have any worth, they represented something that did.
Paper money was used for 500 years until the Chinese experienced one of the earliest examples of a monetary crisis: Overproduction and issuance of these notes triggered hyperinflation, leading to the abandonment of paper currency in 1455.
China invented not only paper currency, but also fiat currency, as in money issued by the government and declared legal tender. This is in contrast to bank notes or other means of exchange issued by private organizations.
Wampum -- strings of small beads of different colors -- was used by Native Americans in their trade with Europeans. Before European settlers arrived, the beads were used for other purposes, including storytelling, gifts and asking for marriage.
As European settlers learned about the value of the beads to native Indians, they established wampum as legal tender in New England from 1637-1661.
The British first instituted the gold standard in 1816, pegging the value of banknotes to a specific quantity of the precious metal. Intended to ensure long-term price stability, the gold standard would be adopted by major Western economies through the 19th century and into the 20th century.
World War I ended the international gold standard, with countries preventing the exchange of gold reserves for currency, and the Great Depression was the final nail in the coffin for the gold standard in the 20th century.
In 1971, the United States unilaterally declared that the value of dollars in circulation exceeded the value of gold and silver reserve.
By abandoning the system of foreign exchange rates first established under Bretton Woods during wartime, where international X-rates were based on the dollar, the value of which was tied to gold, freely floating exchange rates with the dollar as the global reserve currency would become the new norm.
The largest currency experiment in human history, the euro was first introduced to world markets in 1999 and entered circulation in 2002. Currently the official currency of 18 nations within the European Union, the euro faced existential questions following the sovereign debt crisis from which much of the Eurozone is still reeling.
First introduced in 2009, Bitcoin may be the first widely recognized currency not issued by a government.
Although Bitcoin and other virtual currencies represent a new future for payments, and have been slowly adopted in commercial transactions, volatility and security concerns among many other issues still need to be addressed.