By examining the history of money, this paper describes the transition of commodity money to today’s electronic money. The architecture of payment systems is outlined after the implementation of the money. In particular, it is suggested that new payment technology advances are of immense significance with regard to economic aspects such as electronic commerce.
In today’s world, money is high-tech. Consumers are not only using government-issued coins and dollar bills as currency but are also increasingly using cheques and credit cards. Banks can move millions of dollars by simply pressing one button on their computers.
The following are some of the main stages from which money evolved: (I) Commodity Money (ii) Metallic Money (iii) Paper Money (iv) Credit Money (v) Plastic Money. According to time, place and situations, money has developed across various stages.
The history of money: from barter to bitcoin
For nearly 3,000 years Money has been a part of human culture. This is how the system developed from the roots of bartering to modern currency.
At the dawn of mankind, bartering was used to buy goods instead of money. As the early man started to rear domestic animals, cattle, goats, as well as vegetables and grain were among the earliest types of bartering.
King Alyattes created the first known currency in 600BC at Lydia, now part of Turkey. A roaring lion is featured on the first coin ever minted.
Coins then became banknotes around 1661 A.D. In 1946 the first credit card was produced.
The infographic below demonstrates how money has developed from these early origins to instant iPhone payments from Apple and Bitcoin-the the first decentralized cryptocurrency in the world. The advent of modern bartering has brought the system full circle.
First Stage: Commodity Money
Every product that was commonly sought and selected by common consent was used as money in the earliest time by human civilization. Moreover, In ancient times, the common use of money was in the form of goods such as furs, skins, salt, rice, wheat, utensils, weapons, etc. Well, this asset trade became known as ‘Barter Trade.
Metallic Money As A Second Stage
As human society advanced, commodity money shifted to metallic currency. Furthermore, metals such as gold, silver, copper, etc was popular in the early stage, since they can be easily handled. Moreover, It was the primary source of money in the most significant portion of documented history.
Matter of fact, Commodity money had three common defects- perishability, indivisibility, and heterogeneity. Similar goods were used as currency in different markets or towns, which is why intercity trade was virtually impossible. Furthermore, metallic coins have a specific weight. Coins are used only for smaller retail purchases, as they are difficult to count, transport and shop.
Paper Money: The Third Stage Of Evolution Of Money
Carrying gold and silver coins from place to place widely became inconvenient as well as risky. Thus paper money invention marked a very important stage in money growth. Furthermore, the paper money is managed and supervised by banks. A very large portion of currency at present consists primarily of currency notes or paper money issued by the central bank.
In addition, this type of money is closely in relation to economic technological advances over the years. Money has often adjusted to various economic conditions.
Credit Money: The Fourth Stage Of Evolution Of Money
The credit money appeared virtually side by side with that of paper currency. In particular, People hold a part of their cash as bank deposits which they can withdraw through cheques at their convenience. The check itself (known as credit money or bank money) is not money but performs the same functions as money.
Any amount of money, high or low, the transaction can be possible by cheque. In addition, many governments had their own bank to save and protect public funds, and this led to the regulation of money flow in the economy of a country. And so banking became both the backbone of both household and national economy.
Plastic Money: The Final Stage Of Evolution Of Money
As information & data process digitization began, banks took advantage of this and digitized their accounts. Computer and internet age have provided a favorable environment for plastic money. There are two types of Plastic Monies-credit card and debit card. ATM started to evolve and through this machine, plastic money could be transformed into cash.
On the other hand, the transaction of plastic money is also possible by swapping ATM through the machine. Also, plastic money is safer from being theft and stolen. Moreover, it has grown into a symbol of modernity. Except for those who don’t have it, modern shops ask for the credit card. Thus, money has evolved and its evolution indicates economic development.
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