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Evolution of Money


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A brief history of money from barter to bitcoin. This presentation covers the essential characteristics of money and how it has evolved from barter to commodities to cash and finally to digitized currency, also known as "cryptocurrencies"--the most popular of which is bitcoin.

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Evolution of Money

  2. 2. T H E R E W E R E M O M E N T S I N H I S T O R Y W H E N   C E R T A I N F O R M S O F M O N E Y N O L O N G E R P O S S E S S E D   C H A R A C T E R I S T I C S T H A T A L L O W E D I T T O F U N C T I O N E F F E C T I V E L Y , I T T H E N W A S R E P L A C E D B Y A N E W F O R M O F M O N E Y Over time, changes in societies and technologies rendered older forms of money ineffective or obsolete. Such moments prompted evolutionary changes in the forms and functions of money--changes that continue to this day.  What are these characteristics so critical to money’s functions?  Scarcity: money must have limited availability. Portability: money must be easy to transport. Durability: money must be durable enough to be stored and handled. Divisibility: money must be divisible into smaller units. Changes in the needs and workings of societies have historically driven money to evolve into different forms and applications.
  3. 3. B A R T E R 9000 TO 6000 BC Early humans traded goods they produced or kept in surplus for those which they lacked. Although barter predated money, it nevertheless fulfilled the function of direct exchange between people. What prompted the evolution of barter was that it did not work for indirect exchange of goods. The timing, storage and transport of goods also proved problematic, as in the case of seasonal goods that quickly spoiled. Hence a new solution was needed.
  4. 4. C O M M O D I T Y M O N E Y The use of commodity money--which is a commodity that has value in itself and in addition to its use as a medium of exchange--bridged the gap between barter and currency. Commodity money came in various forms: grains, livestock, tea, tobacco, spices, animal pelts, jewelry, and metals are among the more commonly traded forms.
  5. 5. STANDARDIZED COINAGE As early as 1100 BC, spades and knives made of bronze were traded in China. A proto-currency, this standardized development in the use of metal foreshadowed the formation of coins in the coming centuries. 600 BC to the present
  6. 6. In 600 BC, coins made of Electrum, a gold and silver alloy,  were produced in large scale in Lydia (modern-day Turkey). The weight and purity of metals were attributes that determined the value of coinage, as was the case with most metal commodities. Discovery of the touchstone for purity testing saw the rise of rare metals, namely gold and silver, in terms of value and widespread usage. Technologies to assess purity and weight led to pre-weighted and pre-alloyed coins--a process that evolved into the official minting of government coins, guaranteeing a coin value and weight. Ultimately, gold and silver coins became the most widely used forms of money throughout history.
  7. 7. B R I T I S H T A L L Y S T I C K S 1100 AD Although tally sticks may have existed as early as 18,000 BC, the use of the split tally became prominent in 11th century England to record bilateral exchanges and debts. From its origins as a receipt confirming tax payments to the crown, the tally stick evolved different forms and uses of money. As a medium of exchange, the crown’s tallies could be presented to creditors as a form of payment. Creditors would then collect directly from those owing taxes, or use it to pay the crown for its own taxes. Second, Treasuries would create tallies without any specific backing of future taxes, hence creating money whose value was based on public trust.
  8. 8. P A P E R M O N E Y In 1290 AD, Marco Polo’s account of his travels to China introduced the concept of paper money to Europe. Four centuries later, the concept of paper money finally caught on in the western world with the Bank of Sweden’s printing of banknotes in 1661. Add a little bit of body text 1290 AD to the present
  9. 9. With the Coinage Act of 1816, the United Kingdom adopted the gold standard. The gold standard is a monetary system in which the value of currency defined by gold. Currency was backed by gold and therefore redeemable in gold. The United States switched to gold de facto 1833 and de jure in 1900 when Congress passed the Gold Standard Act. The US remained in the gold standard until 1933, severing its link to gold completely by 1971. The gold standard provided security for those who held gold-backed paper currency. This standard also prevented governments from printing more money than was available in their gold deposits.
  10. 10. The end of the gold standard marked the end of paper currency’s safe haven status. Governments and central banks now monopolize the production and distribution of paper money.  Without gold backing, paper money can be artificially created on a massive scale. This contributes not only to inflation risk but also the obfuscation of true values in goods and services. These factors contributed to the emergence of money's next evolution: the cryptocurrency.
  11. 11. W A N T T O L E A R N A B O U T T H E F U T U R E O F M O N E Y ? Please request our free Comprehensive Cryptocurrency Education Package Learn about Bitcoin, cryptocurrencies, and blockchain: what they are, how they work, and how to take advantage of these emerging technologies.