History of money: From cowrie to bitcoins
Admit it or not, the thought of money revolves around almost every adult who most of the time thinks of increasing the amount of money and of ways to use that to fulfil their long-cherished desires.
But how much do we know about money? Honestly, most of us know very little about it. Let us not be in the dark anymore and find out the history of money.
Cowrie and other natural materials
At the very beginning, various natural elements were used as money. One such significant ingredient was cowrie which was first used as a currency around 1200 BC. Cowries may seem strange as an interchangeable object to many people at present time but they had several advantages. They are small and all are almost identical in size. Moreover, they are very durable.
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The Mollusca that produces cowries is mainly found in the coastal areas of India and the Pacific Ocean. As a result of the expansion of trade, even some European countries began to accept cowries as their currency.
Native Americans used to use a type of shell beads called wampum as money. Another natural coin is whale teeth used by the Fijians. Yap Island (now part of Micronesia) used to carve huge discs of limestone as money. These are still the cultural heritage of the island.
Fake currency notes
Money has been counterfeited since the beginning of its introduction. Even wampum was the target of fraudsters. Counterfeit became such a big problem all over the world that even severe punishments were used to deter it.
There was a warning on fourteenth-century Chinese money that anyone who forged money would be beheaded. Counterfeiters were burned to death in England. In the early days of the American colonies too, the punishment of counterfeiting was the death penalty.
In the past, various measures were taken to prevent counterfeiting. For example, American polymath Benjamin Franklin, who owned printing presses in several colonies, once deliberately misspelt the word "Pennsylvania'' on money. He believed that the forgers would correct the spelling while printing and their forgery would be revealed.
Later, some stricter measures were taken to prevent counterfeiting. The $20 note, for example, is the most counterfeited one in the United States, and watermarks and security threads were added to make them visible when held against light. However, the level of punishment for counterfeiting money has been lightened– the maximum penalty in the United States is 20 years in prison.
Coins
Evidence of the use of metal as money is found in Babylon in 2000 BC. However, standard and certified forms of coin use probably did not begin until the seventh century BC. According to many historians, coins were introduced administratively in Lydia (present-day Turkey) around this time. The coins were made of electrum during the reign of King Aliat (610 BC to 560 BC).
Electrum is a natural mixture of gold and silver. The royal symbol was the lion. Aliat's son Croesus (reigned 560 to 546 BC) then changed the state's monetary system. He introduced silver and gold coins. The use of coins soon spread to other parts of the world.
Parchment
Parchment is a stiff, flat, thin material made from the prepared skin of an animal and used as a durable writing surface in ancient and mediaeval times. Around the 6th century BC, animal skin was introduced for coining money in ancient Rome. Parchment was also used in Carthage, present-day France and even during the reign of Peter the Great (1682-1725) in Russia. The Chinese emperor Yudi (reigned 141 to 87 BC) used to coin money from his collection of skins of white deer. Various designs were inserted in the money having fringes.
Although animal skin money is no longer seen, it had a far-reaching tradition. It is said that the use of the word "buck" – the male of some horned animals, especially the fallow deer, roe deer, reindeer, and antelopes – as a slang of the dollar started because of leather.
Paper notes
It is widely believed that the origin of paper is in China. It is said that this invention probably took place during the reign of Emperor Zheng Zhong (997-1022). Paper money was then made from the bark of the mulberry tree.
Paper money reached other parts of the world in the late eighteenth and early nineteenth centuries. Of course, in those days, paper money was not considered real money. Now, just as a cheque can be used to signify that someone can withdraw money by depositing the cheque, paper money was a kind of covenant that a certain amount of gold or silver can be obtained in exchange for that paper money. But even then, the combination of gold and silver with paper money was crucial to the development of the banking industry.
Gold standard
Needless to say, with money come many problems. One such problem is printing as much paper money as a country wants. A country can become rich overnight by printing a huge amount of money, which should not be acceptable. So in 1821, the United Kingdom, which was the strongest economy in the world at that time, introduced the Gold Standard. Through this, they started printing paper money as per their gold reserves and also determined the value of money accordingly. Soon countries like Germany, France and the United States also adopted the Gold Standard.
However, there were some obstacles to the Gold Standard. For example, it undermines the ability of a country to remain isolated from the rest of the world's economic recession or inflation. After the Great Depression from 1929 to 1939, the world's top nations began to rethink the Gold Standard.
Comparing the gold standard with money ceased by the 1970s. But since then there have been several instances of hyperinflation or extreme inflation. For example, in Zimbabwe in the early nineties, they even issued a $100 trillion coin, with which one could buy only a loaf of bread!
Credit cards
Credit cards have existed for centuries, but the advent of the universal credit card did not occur until the 1950s. That same year, two Americans, Ralph Schneider and Frank McNamara founded the Diners Club. In a short time, other cards also came. In 1959 American Express introduced a plastic card.
In the 1960s, IBM introduced a magnetic stripe on credit cards. Account information could be stored there. As a result, traders no longer need to call credit companies for authorization. In the 1990s, chips were embedded inside cards that encrypted account information, which increased security.
There is also a change in the account balance. Initially, credit card users had to pay the full balance by the end of the month. Finally, American Express allows its customers to carry the balance. Other companies follow suit. Of course, interest would be applicable in this case. Even then, taking advantage of this opportunity, customers began to abuse the procedure. And at one point, the problem deteriorated so much that it led to the credit card debt of American customers exceeding $1 trillion in 2017.
Mobile money
Mobile phones have been in use in Bangladesh since the early 1990's. But using the device as a medium of financial transaction is not older than a decade. You can easily open an account on your mobile phone and operate it. Your phone number becomes your mobile financial service account. MFS has revolutionised the transaction of money. Anyone can send money anywhere in the country by mobile phone, which would otherwise need to be sent by courier service or banks. MFS providers like Bkash, Nagad, and Rocket are now household names. Their agents are everywhere within your reach for cash-in and cash-out services. Apart from sending and receiving money, you can pay utility bills or application fees in government and private offices using any of these services. MFS has emerged as a saviour during the pandemic and the government used this tool to reach cash handouts to millions of people during hard times.
Bitcoin
A digital currency system called bitcoin came into being in 2009 by undercover computer programmer Satoshi Nakamoto or a group of computer programmers. However, this currency is not issued by any central bank, nor is it regulated under any formal restrictions. A decentralised network of computers keeps track of all transactions.
The identities of bitcoin users are also kept secret. They can only be identified by their digital wallet ID. The value of bitcoin is determined by bidding. This method is a lot like valuing a stock.
Bitcoin is made in a process called mining. There is a competition between several computers to solve complex mathematical problems, and through this, the transaction blocks are verified. It may sound easy, but it is not. An estimated seven trillion attempts are made before a solution could be found. In the end, the owner of the winning computer gets the newly created bitcoins. This makes the new system even more secure.
To date, it was possible to make 21 million bitcoins. The number of bitcoins already mined worldwide is around 19 million. New blocks are constantly being mined, so the number of bitcoins increases every 10 minutes.
