More than 3000 years ago, one of the most important inventions for humanity appeared and that invention was – money.
Today we consider money to be any clearly identifiable object of value that is generally accepted as payment all over the world. Over centuries, money has evolved and the shape of money we know today was not always been like that. In the beginning, people would trade things with each other to get what they wanted and that is called bartering. The concept of money has evolved over time changing various forms such as clay tokens, agricultural products, gold, copper coins, paper money, plastic cards to cryptocurrencies today.
Along with money, international money transfers and payments were evolving over time. Let’s take a look at how money has evolved over time to gain today’s shape.
Barter system — 3000-600 B.C.
Between 9,000 and 6,000 B.C., people used livestock as the main way to trade and as they began farming, they began trading vegetables and fruits too. The earliest recorded long-distance trade was between Mesopotamia and Harappan civilization of Indus Valley around 3000 B.C. Traders from East and West were exchanging gold, silver, silk, ivory, precious materials etc.
The first coins – 600 B.C.
The first manufactured coins appeared in several places separately, in India, China, and the cities around the Aegean Sea between 700 and 500 B.C. Aegean coins were stamped, heated and hammered with insignia, the Indian coins were punched metal disks and Chinese coins were made of bronze with holes in the center of it to be strung together. The first modern coins were invented in the kingdom of Lydia in Asia Minor around 600 BCE and later spread throughout Greece in form of a disk, circle, with a human head on one side, made of gold, silver, bronze. Ancient Sparta minted coins from iron to discourage its citizens from engaging in foreign trade, and gold coins began to spread again in 13thcentury. Europe was trading with copper, silver, and golden coins. This shape of money has replaced bartering and made international trade much easier.
International banking — 15th to 18th centuries A.D.
During the 15thcentury the Italian banking family Medici was first to open banks at foreign locations to exchange currencies because of the needs of the merchants. They created Nostro (ours) book which contained two columns with amounts of foreign and local currencies. During the 17thcentury Amsterdam maintained an active forex market and in 1704, the foreign exchange took place between agents from the Kingdom of England and the County of Holland.
Birth of the U.S. Dollar — 18th century
When colonizing America, colonists used any currency they could get their hands on. On February 3, 1690, the Massachusetts Bay Colony issued the first paper money in the U.S. in order to pay against military action against Canada. The dollar was chosen to become the monetary unit for the USA in 1785 which over time became the best-recognized currency in the world. The Coinage Act of 1792 created the United States dollar as the country’s standard for the money. The New York & Mississippi Valley Printing Telegraph Company was established in Rochester, New York by Samuel L. Selden, Hiram Sibley, and others. They wanted to create a telegraph system with unified and efficient operations and so they united with another company and Western Union is born. As the company was growing rapidly, 1871 they introduced money transfer service based on telegraph network. After only a few years, the company left the telephone business and money transfer became its primary business.
Wire transfers became very popular in the late 19thcentury as more and more people started working with contractors overseas. By 1900 Western Union operated a million miles of telegraph lines and two international undersea cables.
(SWIFT) — Begin the 20th century
Around 1913, nearly half of the world’s foreign exchange was conducted using the Pound sterling and the number of foreign banks increased quickly. During the early 20thcentury trade was most active in Paris, New York, and Berlin. Global network the Society for Worldwide Interbank Financial Telecommunication (SWIFT) was found 1973 in Brussels under the leadership of Carl Reuterskiold and was supported by 239 banks in fifteen countries. This company established common standards for financial transactions and a shared data processing system. SWIFT doesn’t move the money, their network transmits messages between banks and allows them to make transfers.
Paypal – End of 20thcentury
Paypal was established in 1998 as Confinity, as the first online money transfer service and had its initial public offering 2002. Paypal today operates in 202 markets and has 244 million active, registered accounts. PayPal’s service allows customers to send, receive and hold funds in 25 currencies worldwide. People can make financial transactions online by granting the ability to transfer funds electronically between individuals and businesses. Customers can send or receive payments for online websites like eBay, purchase or sell goods and it’s not necessary to own PayPal account to use the company’s services.
Digital currencies are the latest shape of money we know and the Bitcoin is the world’s largest cryptocurrency whose coins are worth $137 billion. Bitcoin was invented 2009 by Satoshi Nakamoto and based on the blockchain technology. Cryptocurrency represents a digital asset to secure financial transactions and verify the transfer of assets. These digital currencies use decentralized control as opposed to centralized digital currency and central banking systems. Transactions take place between users directly without an intermediary. Since the release of Bitcoin, over than 4000 other cryptocurrencies have been created.
“Digital money” is the future
Digital currencies such as Bitcoin, are considered to be the currency of the future. They have many advantages and forms of application people can use. When you are using cryptocurrency, you activate ‘’push’’ mechanism that allows you to send exactly what you want to the recipient, and when you’re giving a credit card to the merchant he/she has access to your full credit line even if the transaction is for a small amount. They are digital and cannot be counterfeited or reversed arbitrarily by the sender. Nevertheless, time will show if it’s time to replace traditional money shape with digital currencies.