From cattle to Bitcoin: the brief history of moneyAndrey CostelloAndrey CostelloOct 5 · 6 min readMoney existed even in ancient times when people had no idea about economy or banks. The concept of money transformed drastically over the centuries. What would it be in the future?

Thousands of years ago ancient tribes built their economic relationships with first forms of money. Here’s how humanity came up with the idea of dollar and Bitcoin in the 21st century.
Money appeared much later than the formation of subsistence farming: at first, the ancient tribes used means of exchange (cattle, fish, jewellery, bread, meat or fabrics). Every tribe used different means of exchange. For example, in Mexico, cocoa beans were used as “money”, pearls and shells on the islands of Oceania, and skins of valuable animals in Alaska and Canada.
Such commodity-exchange relations were not very convenient so it stimulated the need to create a universal exchange equivalent. So there was money. At first, they were metal (in the manufacture in different countries such materials as copper, silver, bronze were used). Paper money appeared only in 1910 and since then has firmly entered our lives.
Ten years ago an anonymous called Satoshi Nakamoto introduced a brand new system, that potentially could transform basic conceptions of the modern economy. He made a decentralized digital currency Bitcoin, that doesn’t rely on a central bank or other financial institution. There is one fascinating thing about Bitcoin — it is the most “fair” currency of modern society because no one can abuse its emission. Let’s look at the history of money first to understand why BTC could have an important place in our lives.
First barter deals
At first, the ancient economy functioned on the basis of direct barter exchange of goods, which was rather inconvenient, since each participant in the economic activity had to look for a seller who would be willing to exchange his goods specifically for him. However, over time, people have noticed that some things are much easier to sell than others. Almost everyone needed grain as a reliable and easy-to-store calorie source. In northern areas, almost everyone needed well-kept warm fur. It was these popular products that became the first commodity money, which was a product that could always be easily sold.
Later, metals became the most desirable goods among people. It was valuable and much easier to operate than bags of grain or herds of cattle. Years after this civilizations came up with their standard in the process of coins minting.
First metal money
The earliest coins are mostly associated with the kingdom of Lydia of the late 7th century BC, located on the territory of modern Turkey. First Lydian coins were minted from electrum (a natural alloy of gold and silver). The Lydian king Croesus was the first to set the standard for the purity of the precious metal in his coin and assured its authenticity with the royal seal.

Later in Roman Empire ancient “economists” came up with the idea of one standardized currency, that is made from gold, silver or bronze. Finally, the idea of something relatively small and precious migrated all over the world. Almost all developed empires were using their own currency.
The year 910 was a turning point in the history of the development of money — it was at this time that paper money appeared in China. But if earlier their essence was simply obligations to issue natural money (of corresponding value), today paper banknotes themselves are money.
Paper, paper everywhere
The banking centre of Europe was Italy, which was in a strategically advantageous location in terms of crossing trade routes. Since there was a great variety of different coins in the Middle Ages, the business of changing began to flourish in Italian cities, whose shops (in Italian “banco”) were located in shopping areas and on market squares. In addition to exchanging money, bankers provided capital storage and payment services: the banker accepted the money and issued a receipt instead, according to which cash could be received. Thus, the first banknotes were literally written on paper stating that a person kept a certain amount of coins in a certain bank. They were not so much money as a document that allowed them to be received.

The next step was the printing of banknotes by banks in an amount corresponding to the number of coins available in storages. The first Central Bank in the world was the Bank of Sweden, founded in 1668.
The relationship between paper and metal was not simple, the peak of the dominance of the latter was the era of the gold standard, which was opened by the Bank of England, which announced in 1821 that the pound would be freely and unlimitedly converted into gold. The gold standard was later introduced by the United States, Russia and a number of other countries whose currencies have been exchanged since the standard was introduced at a fixed rate based on the price of these currencies per unit mass of gold.
The system, on the one hand, made it possible to increase the stability of national currencies, on the other hand, it did not allow paper money to be printed in the quantities that the economy needed. Maintaining parity in the exchange rates of gold currencies was also too difficult, and in the end, the victory remained with the paper.

The 1944 Bretton Woods Agreement approved the “gold-dollar standard” (currencies are tied to the dollar, and it is tied to gold), and in the 1970s leading countries began to massively switch to floating exchange rates. Paper money not only got rid of gold but actually intercepted the banner of “real money” from him. The so-called demonetization of gold, which has now become an ordinary exchange commodity, has taken place.
Cashless society and cryptofuture
The end of the 20th century become the era of the rapid growth of information technologies, and this technological breakthrough also affected the monetary system. In fact, now we are entering a non-cash era when the physical transfer of banknotes from one person to another begins to look outdated. All our money in the bank accounts in 2019, transfers are carried out in a couple of mouse clicks, contactless payment technologies are being developed. Once the first bank bills allowed merchants to abandon the need to take heavy bags of coins with them on a trip, now you can go shopping with one smartphone.
What will happen in the future, no one knows. However, we can say with confidence that the essence of money is unlikely to change. Like two thousand years ago, money can be everything that people consider it: cattle and grain, gold and silver, numbers in bank books and data on the blockchain. Money is what a person agrees to accept as payment, and this is their essence.

Right now you don’t even need a bank to create something valuable that can be used as money. Bitcoin network, invented by mysterious Satoshi Nakamoto allows everyone to produce cryptocurrency which almost everyone will be happy to receive. But, there is one trouble: this production process (also called mining) requires a lot of specialized equipment units. Not everyone has enough money or good storage place for mining farm.
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