Evolution of Money: the Past, the Present, and the Future (Part 1)

History became a part of human history about 3,000 years ago, but going by definition of money, it is justifiable to say that it had been in use a little longer than that. When people discovered that they could trade their surplus goods such as grains and hides for those they lacked, like salt and hoes, money was effectively a part of us. When early man began domesticating livestock and plants about 11,000 years ago, it spelt death to the hunting and gathering way of life and paved way for more permanent settlements. Bartering set the stage for money because of its most important property: exchange of value.
It became so popular before money that it formed the backbone of the economy of Egypt 9,000 years ago. It was very easy for someone growing wheat, for instance, to trade several bales of his harvest with another who rears goats. However, barter’s greatest weakness was that it was difficult to quantify, and business was only possible when a seller can find a buyer with the exact goods they are looking for in the right quantities. Yes, barter was great, but its limitations were too great for it to be convenient. These drawbacks led to the gradual introduction of a new medium of exchange to replace barter.

Societies along the coast of the Indian ocean solved this problem about 1200 BC by introducing a more standardized currency: cowrie shells. This currency worked just like modern currency and it simplified commerce. As a medium of exchange, cowrie shells were more effective than barter. This currency caught on in Africa and East and South Asia.
The problem, however, was that cowrie shells were not worth a lot of money and it had no central control authority. It wasn’t long before a new medium of exchange was born to replace it. In 1100 BC, people in China began using small replicas of goods cast in bronze as currency. This type of currency may not have caught on for practical reasons but they gave birth to the first Gold currency marked ‘Ying Yuan’, Ying being the name of the city in which the coins were used.
These coins, now referred to as the ‘Chu gold block money’, were made of sheets of gold about 3 to 5 millimeters in thickness and available in varying sizes to represent different values. This currency is considered the first real money used in recorded history.
In the time before coin money, Europe and Asia relied on precious metal currency, especially gold and silver. Travelers and merchants carried with them bars (ingots) and rings of precious metals across the world, and while they stored value and were a medium of exchange, they were very cumbersome and inconvenient. They had to be weighed and their quality verified by an expert every time a transaction took place. Precious as they were, these commodity currencies had great drawbacks, the most notable being that they were liable to value fluctuations, they were not compact, and were not directly convertible in all markets.