How Money Evolved And Continues To Evolve With Time
‘“Money”, the one thing which has become root of all evil’. It has been in existence since ages and evolved with the human society. It is interesting to look back and understand what was the form of exchanging goods and services among humans. As the humanity evolved, the concept of money changed its forms.
When talking about evolution, one should not only look at the history but also estimate and expect what will happen in the future. Therefore, I decided to summarise how money has evolved and continues to evolve as a medium of exchange. In order to keep it simple, I will not bore you with the historical period and dates because it is always subject to debate and takes the whole point away in a different direction. Whether it was BC or AD what one needs to understand is the crux of the monetary system.
Here Is How Money Has Evolved As A Medium Of Exchange:
Started With The Barter System
In the historical era, the earliest written evidences show that nothing was free in the ancient world. We cannot be certain about how it was when we were just evolving from apes (for those who believe in the theory of evolution). The evidences show that in the ancient wold goods were exchanged for goods. This method was popularly termed as ‘barter system’.
In the barter system determining value of a commodity was difficult and hence we cannot certainly claim whether it should be considered as money or not. An example of barter system would be exchanging 1 Kg rice for 1 Kg wheat. That is as basic as it was. So, who was there to monitor these transactions? It is safe to say that it was mutually agreed upon and based on trust. We look at the valuation aspect now because of that’s the way we perceive things. We perceive them in numbers, quantity and value. But in the ancient period general perception would have been different.
It could have been more complex than our current system or completely simpler than what it is today. However, we will never understand the valuation system because of the years of evolution our society has went through. People in those times would have been happy because they got what they wanted in exchange of what others wanted. Though it can be difficult to understand but that is what barter system was. One thing for sure, barter system is the palce from which money evolved and became the medium of exchange.
Moved Slowly To Precious Artefacts
So the barter system survived for some time. Post that the human civilization evolved and we started valuing commodities differently. As the understanding improved, we started giving more importance to precious metals and gems. Metals like gold and silver were valued more than other metals. Some stones, gems like diamond were considered more precious than the rest. Therefore people started accepting them in return of the goods and services.
This was the time when rulers and dynasties started emerging. These royal houses flourished by accumulating more and more amount of precious artefacts. In order to increase their reserves they started invading other territories and exploiting their reserves.
I think it was simple when barter system was in existence. This emergence of accepting precious artefacts resulted in greed and became the point of fights and invasions over the period.
Emergence Of Coins And Paper Currency
Moving forward, the humanity realised that we cannot rely on either barter or precious metal. The first was to difficult to evaluate and the latter could not be made available to the general public. Throughout the history, many civilizations came up with coins made up of different metals. These coins had various denomination. People started leveraging the fact that these coins were made out of common metals so they started minting their own coins. Things became haywire.
Through these years/decades of ‘trial and errors’ we came to a regulated form of currency. Coins and paper currency (also known as fiat money). In the earlier times, the value of the metal could be more than the denomination hence created issues. So we needed some metal and denomination which can correspond. The coins that we see today hit the perfect balance. The denomination on the coin represents the value irrespective of the metal.
Talking about paper money, it is considered as a legal tender. The worth of the paper has nothing to do with the denomination. The best part, the paper in isolation is worthless, what makes it worthy is the obligation of paying the value undertaken by the government. Yes the words that you notice on the currency notes indicate the undertaking by the government.
So at this point of time, we are at a situation where we can exchange goods for goods, we can still accept precious artefacts and lastly we accept physical currency to pay for our goods and services.
Taking It Digital And Paperless
What came after the coins and paper currency is the world of digitalization. Things started going digital by the end of 20th century and in the 21st century we had a massive wave of digital things. Though we are still miles away from having flying cars, we are slowly progressive moving towards a digital future.
At this moment we have the coins and paper currency in existence but slowly all the governments are pushing us to go paperless and use ‘secured and trusted’ payment gateways to accept and transfer money. These include Unified Payment Interface (UPI) or similar secured gateways regulated by the central banks of the country.
Why are we talking about going paperless? Because it is eco friendly. The more we use metals and paper we have to sacrifice our environment. Its not about the raw material but also the energy which gets utilized for printing and minting. Moreover, the physical movement of the currency is another security issue. The rate at which counterfeiting is increasing due to advanced tools it is becoming more and more difficult for the governments to come up with security measures to reduce counterfeiting.
Through the paperless currency we are ensuring that the transactions are safe and secured. At the same time, we are keeping them simple to understand so that more and more people can adopt to this.
Peek Into The Future: Crypto Currency And More
So we moved from barter to precious artefacts and then to physical and digital currency. What does future have in its basket with respect to money? Will we stick to the same concept of money as a medium of exchange or with the evolution of civilization our parameters will also change? A glimpse of the future can be seen in the concept of Crypto Currency.
But, how does it differ from the digital cashless money I mentioned above? The factor that distinguishes crypto currency from other payment gateway is its regulatory authority followed by trust that one needs to have while making monetary transactions. We are yet to get accustomed to a non-regulated system of money management. We still need assurance from the banks and financial institutions that the money we are keeping will remain safe.
The basic principle of crypto currency is its anonymity. There are currently several crypto currencies in existence. Due to the huge gap between demand and supply we are experiencing the prices of them sky rocketing.
We cannot completely consider crypto currency the evolved form of money unless it is globally accepted. Some of the countries are still sceptical and hence they have not legalized it in their country. But, we can never be completely sure, this can become the next “common thing” if things come around properly.
Before concluding the post a worthy mention with respect to the future of money would be concept that was shown in the movie ‘In Time’. In that movie, time is treated as the futuristic currency. Literally taking ‘time is money’. Its worth watching from the point of view of understanding how money can evolve in the future.
