What comes to your mind when you hear the term “money”? Do you think of dollar bills, coins, or cheques? Do you know that the value that people place on money has nothing to do with the physical value of money? Money itself is nothing. It can either be a metal coin or a piece of paper with a historic image on it. The value of money is derived from its value by being a medium of exchange, a unit of measurement. Money facilitates in trading of goods and services. It makes us understand the value of goods and provides us with the facility of saving up for larger purchases in the future.
From Barter System to Notes: the History of Money
Nobody knows the person who has invented money. But, historians believe money was first introduced as metal objects as early have 5000 B.C. Before coins came into existence, bartering was used as a way of exchanging goods and services. But over time, it was understood that bartering is not a good choice for the exchange.
The Lydian’s were the first in the west to produce coins in around 7000 B.C. Other civilizations followed shortly after. Accepting coins was seen as an easier way of exchanging goods rather than the barter system. China was the first country to introduce paper money, and it became popular from 970 A.D onwards.
Later, banks started the use of banknotes for deposits and loans. These notes could be exchanged at the bank anytime for their face value in silver or gold. These paper notes worked much like currency today. But they were not issued by the government. It was issued by banks and private institutions.
The 21st century introduced us with two new forms of currency. They are mobile payments and virtual currencies.