The Evolution of Money from Cows to Coins to Cryptocurrency

Ah, cash. Should I say money instead? How much? Save up? We all know what you’re talking about no matter what word you use.
We’re talking about Dinero, bills, bread, bucks, and cash. That thing that keeps everything going. But where do they get the money? Who came up with it? Did it always look green? Let’s look at the past of money and see what we can find.

Before we start, we need to get something straight. In our modern world, we use money to trade things or services for something of value. Most of us have it put down in our bank apps. But, of course, it wasn’t always like that. Before we made money and gave it a set value, people used to trade with each other.

I’m talking about societies that were around more than 8,000 years ago. People used to deal with each other directly, using things they had too much of. Imagine you were a sheep farmer, and this season you had more wool than you and your whole family could use. So you end up with more of your goods than you need. But you didn’t grow any potatoes, and you need them for the soup you eat every day.

Your friend John grew some potatoes, which is good, because he needs wool to make his winter clothes. You trade or swap things, and everyone is happy. But let’s say that John’s crop came early one year, before your sheep were fluffy enough to give wool. So what? If only there was some kind of technology that could make this conversation go more smoothly…

Mesopotamians and other ancient peoples knew that this kind of problem happened more often than not. So, they started a way of keeping records that grew into what we now call accounting. This way, the government could keep track of who owed what to whom and how much. At first, they kept track of things like wheat, wool, and animals. Like this beautifully carved rock that was used as a receipt for a swap of cows.

Over time, the Mesopotamians started using standard units of account to keep track of all of their bills. And, believe it or not, shekels of grain and cowrie shells were the first common units of measure. Early civilizations could use bookkeeping to set up a way for people to store value and use it whenever they wanted.

Footnote: We came up with writing so we could keep track of these business deals. And that’s how money came to be. But at that time, it hadn’t turned into a coin yet. Instead, it was the word of an accountant about how much money someone had saved and what they could trade it for. I mean, that’s probably not the most reliable way to keep track of value, so people came up with coins as a real way to do it.

So, people made a way to keep track of their trades. With your bag of cash, you could buy a cow. The amount you owed was based on how much the coin itself weighed. This was the first time coins were used. But as time went on, we started giving different coins different prices.

So a gold coin was worth more than a silver or copper coin. Cool, huh? Around 400 BCE, towns were getting bigger and bigger, and people were trading with people all over the world. But different countries gave each coin a different value. Since silver was worth different amounts in Italy and Turkey, new problems came up.

It was important to have a standard exchange rate. We were able to make coins work for a few hundred years. But people soon started making fake coins by mixing rare metals with less valuable metals. Because of this, some societies started to use paper. This trend spread all over the world because of globalization.

I mean by “globalization” trade. Trade was a way for traders to get from Europe, which was on one side of the world, to Asia, which was on the other. Traders and travelers who went back and forth, like Marco Polo, found out that some Asian countries used paper as a form of money. They also helped bring it to Europe.

By the 17th century, the first banks in Europe started giving out paper money, and it quickly became popular. Money doesn’t grow on trees, as the saying goes. That’s because someone has to decide how much money will be going around. So who makes that choice? And what was the reason?

This job was given to the government. They decided that people like you and me shouldn’t be able to make money at home. So, we needed a method that would do that for us. In the US, it’s called the FED, which stands for the Federal Reserve System.

When it was first set up in 1914, the so-called gold standard was used to figure out how much money it could print. Many countries in the world still use the gold standard. It’s a way to find information. Before there were organized banks, a person’s income was measured by how many cows they owned.

Over time, this measure changed from silver to gold. So, for example, a country’s amount of money was tied to how much gold it had in stocks. So why doesn’t the FED just print a bunch of $100 bills and make everyone rich and happy? If they did that, the paper money would no longer be worth anything.

This is called inflation, which means that it takes more money to buy less. Have you ever seen pictures of people going around with money in plastic bags so they could buy bread in the morning? When inflation gets out of hand, things like this happen. Prices go up every minute, and you need more money to buy the same things as you did before.

So paper money is pretty useful for everyday things like taking a short taxi ride or buying some candy. But that’s not true when you have to pay a bigger amount. During the 1950s and 1960s, technology made it possible to change paper money into plastic money. So, banks came up with credit cards, which let them keep a small part of the deal for themselves.

You can buy a shirt or other things online today using your credit card number or even your phone. But when credit cards were first used, it wasn’t like that. If you wanted to buy something, the cashier had to call your bank and have a person check by hand to see if you had enough money.

But think about having to check more than 300 million deals by hand every year. Almost impossible, right? Luckily, the growth of the banking system went hand in hand with the improvement of technology. So, they started using IT to check our funds for us.

Today, all card operations are handled by the big mainframe machines. Their technology is so advanced that they can be set up to know how each individual buyer acts. So, if they think someone else used your card to buy something, they can block it. Neat! We’re grateful to computers!

The overall amount of money in the world is thought to be around $400 trillion. If we count assets and digital currencies, which some people call the future of money, this number goes up to $1.3 quadrillion. We’ve talked about how IT changed the way money is handled. Well, now there are things like Bitcoin that are called “cryptocurrencies.”

Keep in mind that Bitcoin is not the only cryptocurrency. Bitcoin was the first one to be made. It was made in 2009 by Satoshi Nakamoto, a mysterious computer programmer or group of coders. Ethereum and Tether are two other cryptocurrencies. But Bitcoin by itself is said to be worth more than $370 billion. What is a cryptocurrency, and why is everyone talking about it?

Crypto became popular with some people because it is like a currency that is based on people. This means that it gets around the way banks usually work. Those who use it are the ones who take care of it. The values aren’t kept in a real vault. Instead, they are kept in “clouds” that are run by computers.

It is also not made by a central bank like dollars are, and its worth is not based on something like the gold standard. Mining is the process by which they are made. It’s mostly just a bunch of computer programs that solve very hard math tasks. The race is over when the first computer to solve the problem makes a Bitcoin. But its value is based on how much people believe each other, not on a measure like gold.

If it sounds difficult, that’s because it is, and just like the first coins and credit cards, it will take time for most people to accept it. So, whether you call it Benjamins, cha-ching, dough, ducats, funds, gelt, greenbacks, lucre, moola, quid, sawbucks, shekels, or simoleons, Money, Money, Money (thanks, ABBA) does indeed make the world go round.