From Coin to Bitcoin: The socio-economic history of money (Part-1)

Do we have a precise idea regarding the evolution of money throughout the history of humanity?
Do we know it well enough that exploring the history of money would simply lead us through the exciting, thrill-ridden history of human civilization? That we can pinpoint the rise of an economic superpower by trailing their efficient utilization of money? Or how particular symbolization of money eventually represent the very notions of sovereignty, strength and economic superiority?

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Ever wonder how the very notion of money came into existence? Why people crave so much for those puny pieces of papers when they don’t have values of their own? in our mainstream economic activities while virtual cryptocurrencies like Bitcoin and Ethereum are being popular throughout the world despite widespread security concerns? Who determines the currency exchange rates and through what mechanism?

I know most of us confronted all or some of these questions while preparing for an exam or attending a class, or perhaps during a debate among friends analyzing the modern economic and monetary systems. But do we have a precise idea regarding the evolution of money throughout the history of humanity?
Do we know it well enough that exploring the history of money would simply lead us through the exciting, thrill-ridden history of human civilization? That we can pinpoint the rise of an economic superpower by trailing their efficient utilization of money? Or how particular symbolization of money eventually represent the very notions of sovereignty, strength and economic superiority?

Now dear readers, these are intriguing questions, eh? Let’s find out then what’s in it. In this series of 10 articles, we’re going to get a thriller ride through the socio-political history of money. We’ll find out how it all begun, how we’ve reached today and what the future may look like. We’ll explore the exciting mechanisms of money circulation, the economic and social footprints created by currencies and the inherent stories of power and politics. Simply put, this thriller ride is going to take us places where we had never been before and what we might have never thought before.

Part -1: Civilization and Money: How it all began

It all started with the barter system: I love fish but don’t know anything about fishing. You, my friend, is a first-class fisherman but you would really love to have a better fishing net. Fortunately, I have some skills in knitting and it would be my pleasure to make you a better fishing net, only if you share some of your spoils from your next fishing voyage!

In an ideal scenario, it’s the perfect set-up. I give you a fishing net and you give me fresh fish in return. But the problem is, the world is not that perfectly synchronized in reality. Maybe you prefer to take a mid-day nap in that all-beautiful sunny weather instead of fishing right when I crave for some fresh Sardine. Or maybe you would stick to your old, worn out fishing net instead of sharing your precious fish. These types of mismatches are common in real life and posed a serious threat to the fulfillment of day-to-day necessities of our ancestors.

So, they started to get smarter. The Chinese first had it sorted out – they created bronze-clad miniatures of tools and cutleries and started to use those as the medium of exchange. This system, however, was not much of a comfort as people started to get hurt by the sharp angles of these miniatures. Moreover, carrying such miniature ‘currencies’ was a big hassle to handle. So, the shape of those bronze currencies became round eventually.

Though the Chinese started it, King Alyattes of Lydia minted first formal/official currency in 600 B.C. where they used Electrum – an alloy of gold and silver to mint the currency with specific images curved on the faces of such coins to determine the denomination. Soon after, people from all over the world started to use coins made of precious metals like Golds and Silvers and this system continued for a considerably long period of time. Then the Chinese kicked in again, this time with another truly revolutionary idea – the paper money! The Chinese people were used to with the paper money from around 1000 A.D. while Europe and the rest of the world were still kept using metal coins.

As trade and commerce were flourishing all over the world, the comforting features for paper money became evident gradually. It’s easy to carry, it’s not resource-hungry (you don’t need precious metal like gold or silver for creating these) and most importantly, paper money doesn’t need to have a particular value of itself. Its value resides only within the collective imagination of mass people. So, people from all over the world started to embrace paper money. Though Europe first issued paper money in the late 1600s, the industrial revolution magnified the requirement of paper money extensively.

After all, you can’t buy all those industrial merchandises if you don’t have an abundance of cash in your hand and minting that ridiculously colossal volume of coins from the limited supply of precious metal is not a viable option. Thus, along with the rise of industrial-era economic superpowers, money got the near-universal form of paper notes/bills by the end of the 20^th century.

For the history of human race, the 20^th century was truly remarkable. This century observed unimaginable destruction from two world wars along with astounding development in science and technology. In the history of money, this century was revolutionary too. How? Well, dear reader, we’ll explain that in the very next article. Meanwhile, please share your views on this part and keep in touch! Happy reading!

 

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