Hello, bitcoiners and adopters of Satoshi Nakamoto's revolutionary ideas.
I am new to the crypto world, and every day I am learning new things and then seeking another topic to cover. As I know, the current time and the coming years will be the Crypto era, which will be ruled by those who can adapt. While learning, a thought came to my mind, why not write down this knowledge in a forum where many users, like
Newbies,
Junior members, and
Members, are also in the learning phase? They can gain knowledge all in one post, for which I look into many sites and videos to gather this information, so they don't waste time on useless content and can clearly and easily understand it here..
So, as you see from the title, I am covering the evaluation of money first to help you understand how it started, why it changes over time, and how it led to the crypto revolution. For me, this topic is very important, if one does not understand it, then they may face some hurdles in their journey. Time is precious, so let's dive into the topic and not waste any more time.
This topic covers the following subtopics:
The Barter System
Commodity Money
Metallic Money and Coins
Paper Money and Fiat Currency
Digital Money and Banking
Cryptocurrency: The Decentralized Revolution
The Barter SystemThe start and the very beginning of this money cycle. Barter means direct trading of goods and services. It is traced back to ancient times (like Mesopotamia or tribal communities around 6000 BC or earlier). At that time, people had no money, in fact, there was no concept of money to give and take something. People used goods, they gave them to someone and received something they needed in return.
How It Started People needed things for their daily life and survival, but there were no other sources from which they could acquire those necessary items. So, what they did was change what they had in abundance in exchange for what they needed, and the same applied to the other side. It was based on mutual needs no middleman, no central body, just "you give me this, and I will give you that."
Why It Worked At the beginning, this went smoothly as the population was smaller and their needs were limited. Everyone knew each other, and there was trust, which encouraged self sufficiency and direct relationships.
Problems and Why They EvolvedThe system was running smoothly, and people were happy with it, but after some time, issues arose that led to changes in the system to counter these problems. The main issue was the "double coincidence of wants," which means that both parties must have the exact thing they need, if one party lacks what the other needs, the exchange won't proceed, causing problems in trading. The second issue was "no standard value." There was no exact value for goods, such as how many hens were needed for one cow, which could lead to disputes. The third issue was "storage and portability issues." You can't carry a cow and dozens of hens everywhere, which was a serious problem.
These were the issues that required advancements to establish a common and fixed value for everyone, everywhere. Moving on to the next:
Commodity Money Around 3000-2000 BC, the concept of commodities was introduced, things that have intrinsic value and are used as money. This was a natural evolution from the barter system. You may be confused about the difference between barter and commodity money, so let me explain it simply, in the barter system, things were exchanged directly (I get this, you get that), but with commodity money, you can use a common item that is not only used for trade but also for many other purposes, like a cow for meat, milk, and labor in crops.
Why did this work? Commodity money solved the problems of the barter system, you could now exchange it for anything you needed, and the other person could take it even if they didn't need it at the moment, as they could use it for something else. It was widely accepted and portable. In ancient times, salt was a common medium of exchange and was widely accepted, it was used for salaries for soldiers. Some other examples include cowrie shells in Africa and Asia, tobacco in America, and gold and silver in ancient China and egypt.
Pros: It is more efficient than the barter system and was easy to carry, especially on long routes, which then opened global trade like the Silk Road.
Cons: No doubt it was a good system, but at that time, a big challenge of verifying purity arose, which then necessitated another system to clarify and fix it. Also, carrying those commodities was a significant challenge as they were heavy, and there was a risk of theft as well.
Metallic Money and Coins: It was called the first official currency, starting around 600 BC in Lydia. It was the official system where the government came forward and made a uniform and fixed value (coin) from gold and silver. Kings and rulers minted metal coins with their seal to guarantee the weight and purity, which were the main issues in commodity money. The coins were imprinted with a lion or a god for trust, or the image of the king.
Why This Shift? It fixed the problems that arose with commodity money, specifically purity and weight. They made coins that were easy to carry, easy to count, and most importantly, backed by the government or authority, which instilled trust in the community.
At that time, several advancements took place in different regions to make things easier, simpler, and more reliable. In China, they used bronze coins with a hole for stringing them together, while the Roman Empire spread coins worldwide to facilitate trade. They used gold coins for large transactions and silver for everyday use, which is known as bimetallism.
Pros: It started banking and the loan system, it is durable, portable, divisible, and much more.
Cons: Just like the others, this system also faced some challenges, such as carrying large amounts of gold coins, which were very heavy, and the fear of theft en route. Additionally, mining metals caused inflation, which created a loop and necessitated another system to counter it.
Paper Money and Fiat Currency: Well, this paper money concept emerged in the 7th century AD in China (Tang Dynasty), but it became popular in Europe in the 17th century and was widely adopted.
How It Started: The concept came from China, where people deposited gold with the authorities and received a receipt as a guarantee, on which the gold amount and other details were written. They then used this receipt to buy things, and those who received the receipt could collect the amount of gold from the authorities. This was called "flying cash."
Why It Evolved: The reason is clear, coins were impractical for large traders, taking much time for counting and requiring heavy lifting for transport. On the other hand, paper money is easy to carry, one thousand gold coins are much heavier than one thousand paper notes.
Pros: Easy to print, shift from one place to another easily, and can be used for global trade too, bringing a revolution in banking and credit.
Reason for change: When the government starts overprinting, it can lead to inflation and the devaluation of money. The currency is controlled by central authorities like banks and governments, which can then manipulate it. If people start to distrust the government, the currency may collapse.
Digital Money and BankingIn the 20th century, where everything changed with modernization, money also transitioned to digital formats with the advent of computers and the internet. From the 1950s to the 1990s, cards, ATM machines, and online banks emerged, offering digital services that allowed people to send and receive money through the internet in digital form. During this era, globalization was fully established, and people conducted trades in every corner of the earth, which required fast and borderless transactions where no physical money was needed directly.
The pros are that it is easier, more trackable, and more secure than traditional methods, however, it is still centralized, meaning banks can control and freeze your money.
The Decentralized RevolutionUntil now, everything was smooth, every corner of it was covered in each system. However, another big challenge arose, centralization, where people do not own their money nor can they control it. For every transaction and withdrawal, they needed the bank's approval. Therefore, a system was required to address this challenge, and in 2009, Satoshi created another decentralized system where the central body would be the host itself, allowing users to control their own money and giving them financial freedom.
He made a coin that works on the blockchain, where everyone can see, track the transactions, and see where their money goes. It's more secure, and the record will be forever. The fee is low, and you can send it instantly. It focuses more on privacy and is borderless.
I think this will be enough for this cryptocurrency section, as everyone knows it very well.
The topic may have some small mistakes, as I tried my best to make it perfect and explain it in easy words, but still, humans are prone to errors. If you guys find any mistakes or misinformation, let me know.
For those who are still confused and need more clarification, feel free to ask. I will try my best to be active and respond on time. Best of luck.
At the end of this topic i have question , will this cycle continue or crypto is the final end of this evolution of money
