The money evolution refers series of money accepted as a medium of exchange over time.
Before the invention of money, people hunted and grew their food themselves. They did not need money.
As civilization started and communities started interacting with one another, they began trading.
First, they exchanged goods and services without money. Later on, as trading increased, a medium of exchange became necessary.
This article explains the exchange of goods and services without money (bartering) to cryptocurrencies.
Before the evolution of money started, people were exchanging goods and services. It is known as bartering.
For instance, those who had extra goats and needed chickens were looking for someone who had chickens but needed goats to trade with each other. Finding and reaching an agreement was difficult, but they did not have any options.
However, it was not as difficult as it seems because the need and wants of those days were very limited than nowadays. For example, they were happy having food and a shelter they had built by their hands, unlike today when going to college, gadgets, cars… are what people needs.
Gold and Silver Standard
The gold and silver standard means people standardized gold and silver in different weights as coins to use as money.
People were paying golden coins for expensive products and services and silver for cheaper ones.
The gold and silver standard made global trade possible. It made globalization possible because gold and silver made capital flows easily from one country to another. So, investment became easier.
Anyone and any country that had gold and silver were prosperous.
As the world economy grew, people mined gold and silver proportionately.
Recession, inflation, and trade deficit didn’t exist. The price was falling steadily.
This stage continued till gold became scarce.
Anyway, the central bank didn’t exist to manipulate the economy. A real free market was rolling the economy.
Gold and Silver Exchange Standard
Gold-exchange standard means that a currency is backed by gold and silver. Or, it means by giving a specific amount of money to the central bank, you will receive the mentioned amount of gold or silver. Back then, the central bank needed a sufficient amount of gold to back its currency.
After First World War, the United States had the largest gold reserves, so it backed its dollar with gold, and this policy made the USD world’s trade currency.
Other countries, on the other hand, backed their currency with USD. For example, Germany backed its Mark with USD. This meant by paying German Mark the holder could receive a certain amount of USD, then could exchange USD with gold in the Fed Reserves of the United States. In simple words, almost every currency was exchangeable for gold directly or indirectly.
Fiat currency is the same as paper money and accounts in banks as credit.
For the first time, China invented paper money back in the 7th century, and widespread usage began in the 11th again in China.
The evolution of money to fiat currency is one of the best things that happened to human beings. It made international trade much simpler and faster. Today, with MasterCard, Visa and other tools people can transfer in seconds without the risk of theft.
Fiat currency is money that is backed by trust in the government. If the value of the fiat currency falls, no one can request something like gold in exchange.
The evolution of money has reached cryptocurrency (digital currency). It is an electronic currency developed by computer scientists.
This currency is decentralized and not governed by any organization inclusively. So, no one can manipulate the market if someone owns a big pile of it.
No one or entity has backed most cryptocurrencies.
They are successful because of trust and confidence in the technology.
However, some cryptocurrencies, such as the USDT are backed by a fiat currency.
Cryptocurrencies are probably the most volatile assets you can invest in or trade. Politicians and famous people such as Elon Musk and Xi Jinping can impact the price of cryptocurrencies just by answering journalists.