The history of money: how did the first money in the world appear?

On Jun 24, 2022

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Brief history of money

The history of the creation of money is directly related to the need for systematization. Once upon a time, a nomadic tribe did not need a universal equivalent – an ordinary barter was enough. But the population grew. It was unrealistic to remember who owed whom and how much. Writing and complex counting (not on the fingers) have not yet appeared. Therefore, the tribes decided instead of keeping debts in the mind to equate them to pebbles. Or beautiful sea shells. So the first money appeared as a way to remember debts.

Soon such a register system, which vaguely resembled monetary relationships, began to appear everywhere. Many tribes of the oceanic islands still use shells instead of money to this day. But this method is only good for small tribes or communities. But with the beginning of the emergence of large social groups, stone money was not a suitable option – a universal material was needed.

Variant of the first currency in the history of money Thus, in the Roman Empire, a decision arose to use gold as money in the form of stamped round pieces. At the same time, the term "Coin" appeared – in honor of one of the epithets of the goddess Juno – in this role, she was the patroness of merchants. Universal money appeared throughout the vast Roman Empire.

Many centuries later, officials of the Chinese emperor decided to record the equivalent of gold on a paper sheet (the first fiat money). And at the end of the Middle Ages in the north of Italy there are modern banks. This is how money, banks, banknotes appeared in history and the gold standard arose (backing the currency with gold).

History of the development of money

Let's once again plunge into the history of money to answer a seemingly simple question – how did money appear?

The history of the emergence of money originates from the Milesian monetary system – from the richest city of Ionia, which owned dozens of colonies. The date of its origin is approximately 7-5 century BC. Later, Phocaea had its own mint and monetary system. The aforementioned monetary systems were created on the basis of gold and had divisions into more valuable and less valuable money, which differed in the weight of the coin.

The history of the origin of money reaches its climax with the advent of Alexander the Great, the Miletus and Phocaean systems were supplanted by the emerging gold coinage system. Thanks to the coins of Alexander the Great, the circulation of a single currency began throughout Greece. For comparison, money circulation in Eastern Europe only began in the 7th century AD.

It was Greece that created the necessary Rubicon for the transition from barter relations to the usual system of buying and selling with the use of money. It is impossible to deny the contribution of other countries to the development of money, but for our purpose – namely, the answer to the question "how did money appear?" – It's enough.

History of money: gold coins of Alexander the Great

metal money

Gold coins actually had the cost of the material from which they were minted, so such money did not depreciate for a long time. The history of money tells that the precious metal was valued in all countries, which made it possible for gold coins to become the only world money at that time, until the 20th century AD. The production of counterfeit money was severely punished.

We have already mentioned that the Phocian and Milesian systems used gold in coinage. Along with them, there were also monetary systems based on silver – these are the Aegim and Euboean systems. In addition, there was also the minting of money from electrum – a natural and artificial alloy of gold and silver.

Later, the minting of money from copper, bronze, nickel and aluminum alloys appears. The mechanism for making coins tried to keep up with the growing need for money – first casting, then casting was replaced by hand stamping of money, and then machine coinage.

The production of money was the exclusive privilege of sovereign issuing states. The state, at its discretion, determines the type of metal for minting money, the weight of coins, and the value of materials relative to each other was determined by the market and the government. This was called "coin regalia". Violation of the accepted rules for making money was the highest crime.

When the history of the origin of money was replenished with the first paper banknotes, the function of the coin, as the only means of payment, sharply decreased. However, money created from precious metals remained a store of value.

Gold, silver, platinum coins are rarely issued today, mainly commemorative signs or commemorative signs dedicated to an event, which are not used as money for payments.

Paper money

China first introduced paper money. For thousands of years, banknotes circulated only in the Celestial Empire and its satellites. In the 15th century, Johannes Gutenberg invented printing, thereby enhancing the role of paper in Europe. Over time, the printing press switched to the production of banknotes.

The first money: paper banknotes of China But metal coins were still in demand, and only by the 17th-18th century the history of the origin of money could boast of its new dignity – paper money gained wide circulation when their issue arose in England, the USA, France and other major economies of the world.

In addition to the obvious advantages of paper money (they are easier to manufacture and easier to store), the history of money knows their disadvantages. Paper money is more prone to inflation because it only denotes value, unlike precious metals. But the history of the appearance of money and its development shows that mass counterfeiting of banknotes gets its answer by creating higher degrees of protection for money.

Most countries use the method of applying watermarks to money that are visible only with a light to protect the currency. In addition to watermarks, embossed marks also appeared – images, special iridescent drawings that change color at different angles of inclination of the banknote.

The history of the development of money did not stand still, and the advent of the telegraph in the 19th century became the springboard for a new era of economics.

The Emergence of Central Banks and the Creation of the World Bank

The history of money did not end with the advent of paper banknotes. It is logical that for the functioning of money and their emission, central bodies were needed that would take on not only the function of their production, but also the control of money circulation. Central banks have become such organizations.

Initially, there was no distinction between commercial and state banks, but with the formation of the monetary system, there is a centralization of money emission and central banks begin to play the main role in it. In the early stages of the development of the banking system, only banks in large cities (more often in capitals) that had their branches in smaller cities were called central. Only in the 19th century did they begin to call the central bank a body specially authorized to issue money.

Interestingly, the role of central banks throughout the history of their existence was played not only by state institutions, but also by commercial ones. For example, in England, the first central bank arose in the 17th century and was founded by several merchants.

The fact is that during the war between William III and France, the crown really needed money and, having received a loan from generous merchants, the ruler honored them with issuing paper money. Needless to say, even today commercial banks feel good in the role of central banks. There is no need to go far for examples – in the US, the Fed, which issues money, includes commercial banks.

The Story of Money: The Building of the World Bank Many mistakenly believe that central banks are run by the World Bank, but this is not the case. In fact, throughout its history, this bank has only performed the function of helping developing countries – in other words, it issues borrowed money.

The World Bank emerged in the post-war era as the body charged by the international community with the task of rebuilding the world economy after the devastating Second World War. Today, the bank gives out money to end hunger and poverty, solve environmental problems, fight HIV/AIDS, and even promote equality between men and women.

The appearance of the first credit cards

The history of money in the XX-XXI centuries is developing in the direction of non-cash payments, and an important step at this stage was the emergence of bank cards, which gradually began to replace paper money.

For the first time, a plastic card called Diners Club appeared in the 50s and was not issued by a bank – its purpose was to pay for restaurant services. A couple of years later, one of the American banks issued a similar card, after which their mass emission began. The world realized that it is much more convenient to make purchases, especially large ones, not with money, but with the help of a card, and, gradually, cash payments began to become a thing of the past.

The first types of credit cards in the history of the development of money Today, you will not surprise anyone with a bank card, and even children know what it is intended for and how it looks. The first cards were a piece of cardboard and did not have any security features. Later, by embossing, numbers and names of owners began to be applied to them, in the 70s a magnetic strip appeared, and only in the 90s did they begin to integrate microcircuits into plastic.

Electronic money

Electronic money belongs to a separate category along with traditional paper money and securities.

According to the form of issue of banknotes, there are three types of electronic money:

Fiat electronic money – electronic money, which is one of the types of monetary units of the state payment system. For example, international payment systems Visa, PayPal. Fiat money is in each of our pockets – these are our plastic cards.
Non-fiat electronic money – expressed in units of value of non-state payment systems. The issue, circulation and redemption of such money occur according to the internal rules of the payment system. Non-fiat payment systems include such payment systems as Yandex.Money, Qiwi, as well as the recently appeared cryptocurrency – Bitcoin, Litecoin and others.
Virtual money is the internal electronic currency of online communities. The scope of their use is limited to these communities.

Electronic money, like any digital information, is based on a virtual key – this key can be copied and used several times. In 2008, a significant event in the history of the emergence of money took place: Satoshi Nakamoto, a Japanese mathematician, creates an electronic payment system that works in a decentralized way using the blockchain, and is not controlled by the Central Bank.

The history of the development of money and the emergence of cryptocurrency Cryptocurrency is created by specialized boards combined into bitcoin farms. The process of “appearance" of coins is called “mining”, the peak of popularity of which passed just a year ago. At that time, it was possible to mine at home and make a profit. Now, unfortunately, the game is not worth the candle and mining does not bring money, but losses from such an undertaking will appear.

The history of the development of money and the emergence of cryptocurrency Cryptocurrency is created by specialized boards combined into bitcoin farms. The process of “appearance” of coins is called “mining”, the peak of popularity of which passed just a year ago. At that time, it was possible to mine at home and make a profit. Now, unfortunately, the game is not worth the candle and mining does not bring money, but losses from such an undertaking will appear.

The idea of any cryptocurrency is complete anonymity and security of monetary transactions. Earnings through distributed computing is a side function. In order to maintain the bitcoin economy, the emission is carried out according to a proportionally more complicated formula, and therefore making money on bitcoin at home has become more complicated.

money today

Today, the history of the appearance of money divides them into two groups – cash and non-cash.

Cash is money that you can “hold in your hands” that is actually in your pocket. Non-cash funds exist in the form of records of electronic bank accounts. The person who has the right to perform operations (transactions) with this money is called the account holder.

One of the ways to access such an account is a personal bank card – a plastic card (fiat). With the help of bank cards, the owner can make almost any payment transactions. It would seem that this is very convenient – there is no need to carry money in your wallet, especially large amounts. The only drawback of bank plastic cards is that not everywhere it became possible to pay by bank transfer.

From the history of money, briefly described in this article, we can draw a simple conclusion – non-cash and electronic payment elements did not appear by chance, and they are gradually replacing cash in circulation. The process of world globalization gives impetus to the creation of a single world monetary unit, which will replace the dollar era. But what kind of currency will it be – a cryptocurrency, or will the history of the development of money go its own way, and an even more advanced model of the payment system will appear?

A banknote with a watermark, a credit card or bitcoin on the screen of a gadget is, of course, not a stone that acted as a currency. But as the history of money shows, they perform the same function – a contract, a register that is used as a store of value, and a unit of account.