History of Money and Currency in the World
Seashells to Stablecoins: A Brief History of Currency
Most people alive today probably haven’t thought that deeply about the nature of money. Sure everyone knows: “Yeah, people used gold ’cause it was shiny, then we started using paper and plastic because it was more convenient.” In a way, that reductive summary is true. But to accurately anticipate the future of currency, it’s crucial to have a nuanced understanding of society’s relationship with money.
Barter and Seashells
The ancient Phoenicians, pioneering traders of the Mediterranean, were known for their practice of “silent bartering” where they devised a system of exchange that required no mutual language or communication at all. Upon arriving in a foreign land, the seafarers would unload their goods and arrange them along the beach, then use a signal such as smoke to attract the attention of the natives – who would then place what they viewed as a fair exchange next to the displayed goods. Items would be removed or added until both parties signaled satisfaction.
As history has proven, barter was ineffective when it came to scaling and abstracting trade. A variety of items were used throughout history to represent a mutually-agreed-upon form of money. Shells such as cowries (belonging to sea snails) were used nearly everywhere across the globe. However as time passed, items such as beads and shells began to be replaced by more standardized currencies issued by central authorities such as the Roman Empire and Chinese dynasties.
The Era of Precious Metals
Precious metals have historically been the single most dominant form of currency throughout most of history, in the form of bullion and coins. While gold and silver are the most well-known metals, copper, bronze, nickel and the mysterious orichalcum have also been used. Ancient Greece, Persia and India were among the earliest civilizations to mint coins from precious metals, and the practice continued unabated until modern times. King Croesus of Greece is credited with introducing the first structured system of “bimetallism” – a monetary standard where gold and silver are both used and a fixed rate of exchange between them determined.
Why were these metals considered so valuable from such an early time? It’s a question that books can and have been written about. Broadly speaking, the rarer the metal and the more useful it is for luxury goods such as jewelry, the greater value societies across history have placed on it. Heavier metals feel more substantial than lighter metals, which could also have played a role. Resistance to corrosion also plays a part – no one wants to see their coins deteriorate over time. Whatever the exact reasons, it’s clear that precious metals have always held innate value for humans – and will continue to do so into the future.
Papers Notes and Fiat Currency
As advantageous and prevalent as precious metals were, they had some disadvantages. Such as… being heavy. A simple physical reality gave way to an entirely new form of money: paper notes. The first paper money came from China and was later introduced into Europe by traders. Paper money was originally a type of receipt or promissory note, and later became a “truer” form of money which was backed by a promise of redemption for precious metal coins or bullion upon demand. In the earliest times, the notes would be redeemed by centralized authorities or rulers, and later by banks.
In the 17th century, banks and governments began to move towards notes as a more formal, permanent form of currency rather than temporary promises of redemption – though in those days, banknotes maintained their status as being redeemable for their worth in specie (physical assets such as gold). This all changed with the introduction of “fiat money” – from the Latin fiat (“let it be done”). Fiat money has no intrinsic value or backing, and is usable as a medium of exchange simply because a government vouches for it, and because society agrees it has value.
The USA notably was a leader in the movement away from gold-backed currency and into fiat money, transitioning from the former to the latter over the course of the 20th century. There have been many long winded debates over the advantages and disadvantages of the change – on one hand, fiat currency gives a government more control over managing inflation and other aspects of a country’s economy. On the other hand, fiat’s lack of direct backing means it can be susceptible to dangerous trends such as hyperinflation during tumultuous circumstances. Critiques of modern fiat currency were a major factor in the genesis of the next major revolution in money – cryptocurrency.
Cryptocurrency, Stablecoins, and Beyond
By now, everyone knows the story of Bitcoin, and how it spawned countless spinoff cryptocurrencies – all aiming to achieve the goal of a currency that is not subject to the whims of any bank or government, but that is decentralized, trust-less and empowering of its users.
While many cryptocurrency projects have successfully formed payment networks, there remain a few stubborn obstacles preventing cryptocurrencies from becoming a more dominant form of money: difficulty of use, lack of scalability, and resistance from the currently prevalent institutions. Volatility, however, remains one of the biggest barriers of all to widespread adoption. Numerous critics of Bitcoin have pointed out – how is anyone supposed to transact or save BTC when they don’t know whether the value will swing 10% up or down the next day?
This brings us to the very cutting edge of modern fintech: stablecoins, i.e. cryptocurrencies that have their value attached to other forms of currency such as USD, GBP, or a variety of others. Stably, a leader in the stablecoin space, began with the Stably Dollar (USDS) and has since worked to introduce a greater range of stablecoins pegged against a range of currencies all across the globe.
But Stably has gone one step further – noting the potential pitfalls of pegging stablecoins exclusively against fiat currencies, Stably made the decision to unite the newest forms of currency with the oldest. Put simply: stablecoins backed by precious metals. Stably is working to introduce both gold-backed and silver-backed stablecoins, and the technology being developed to do so can provide further avenues towards tokenization of virtually any asset, including even oil and rare earth metals. To find out more about Stably’s cutting-edge stablecoin projects, visit: https://www.stably.io/stablyenterprise
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