FreeWord – The Evolution Of Money
Hi folks. It’s FreeWord time!
Money, as we know it, has been instrumental in how societies and commerce have evolved for at least the last 3,000 years. Throughout history, money has changed societies, and in turn, societies have changed money – this is how it has always been and will be. When money was created, the world was very different from today, with a population of just about 2 million. Today, the system is under pressure due to the increased demand for money. The high demand for financing is created by the current growth, and this growth has brought a historical level of economic debt in the world, which in turn has led to an increase in inequality.
Money is valuable merely because of the uniform consensus that everyone will accept it as a form of payment – so let’s take a look at where it has been, how it has evolved, and what the future looks like.
The Definition of Money
The basic definition of money is anything that is widely used and accepted by a group of people in exchange for goods, services, or resources from one person to another. In other words, money is an economic asset that acts as a well-known medium of exchange in circulation in an economy.
The History of Money
Bartering – The exchange of goods or services for other goods or services. One major problem with the barter system was that the trade was often imbalanced since there was no standardized rate of exchange. To solve this problem, commodity money was developed.
Commodities – An item that is commonly used in a given society. Things like cattle, salt, tobacco, and seeds were considered commodities and therefore were used as money. Livestock was one of the most valuable commodities – the word cattle comes from the Latin words “caput” and “capital” meaning property. The biggest problems with commodities were encountered with storing perishable goods, and hauling heavy bags around for trade was found to be far from practical.
Coins – By 700 BC, the Lydians became the first in the Western world to make coins, which were made of electrum, a naturally occurring amalgam of gold and silver. The metal was found to be easily available, easy to work with, and recyclable. Within no time, countries began minting their own series of coins with a specific value, which eased comparing the cost of goods people wanted. In Rome, coins were minted near the temple of the goddess Juno Moneta, which gave us the words “mint” and “money.”
Paper Money – The earliest known form of paper money dates back to 960 AD in China, where a copper shortage forced the issuance of paper money, which was 700 years before the Europeans followed suit. Paper money was the ancestor of banknotes, certificates, and deposit receipts.
Representative Money – With the introduction of paper currency and non-precious coinage, commodity money developed into representative money, which meant the money itself no longer had to possess remarkable value. Representative money was backed by a government or bank’s promise to exchange it for a certain amount of silver or gold. Most currencies in the 19th and early 20th centuries were based on representative money that relied on the gold standard.
The Modern Era
Fiat Money – The money as we recognize it today, and it has only existed for a relatively short time; the first banknote was printed in France in the 17th Century. Most of the modern paper currencies are fiat currencies whose value is derived from the relationship between supply and demand and the stability of the issuing government. Fiat money is backed in value by a government fiat or decree. Fiat currencies have started to disappear; more than 600 of them in the last 30 years and the trend remains. Despite the course, fiat money is still a dominating factor in today’s global economy.
Electronic Banking – Credit card usage has increased significantly in recent years. MasterCard and Visa hold a significant share of the global credit card market, and the situation can be considered a regular oligopoly. However, a new and more comprehensive system is evolving and taking over – mobile payment solutions.
The Present and The Future of Money
The 21st century gave rise to two disruptive forms of currencies: mobile payments and virtual currency. Younger generations have quickly adapted these new payment methods, and many of them do not even know the feeling of holding a real banknote in their hands. For them, money is becoming “imaginary,” forming a basis for disloyalty.
Mobile Payments – This means money given to a product or service via a portable electronic device such as a smartphone or a tablet. Mobile payment technologies can also be used to transfer money to friends or family. More and more services, such as Apple Pay and Samsung Pay, are competing with retailers to approve their platform for outlets. In addition, innovative technologies offer new ways to pay and transfer money with mobile phones, apps, Bluetooth solutions, etc.
Virtual Currency – Was born the day the open-source software Bitcoin was released in 2009. Bitcoin is a cryptocurrency that was invented by an anonymous person or group of people who go by the name of Satoshi Nakamoto. Bitcoins are digital assets that serve as a reward for a process known as mining and can be exchanged for other currencies, products, and services. They use a very strong encryption technology to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Records of these transactions are known as blockchains. The appeal of virtual currencies offers (immutable records) the promise of lower transaction fees than traditional online payment mechanisms and is operated by a decentralized authority (a network of computers), unlike government-issued currencies. The current cryptocurrency market is booming.
Money and Our Society
The monetary system is the core of the economic system known today. Almost all transactions are based on the exchange of money. However, money is only valuable as long as the value is guaranteed, and as long as we trust it is valuable and accepts it as payments and rewards for products and services. Today, trust and value in money are under pressure as confidence in this system has deteriorated. Security is merely a footnote to the recommendations of the European Central Bank. Along with people’s bank accounts, payment networks, such as PayPal and Western Union, can close people’s accounts in no time due to political disagreement, etc. – calling it national security. In fact, this is a financial terror – people are not in charge of their own money.
Future wars will not be fought by footsoldiers but rather by hackers sitting behind computer screens. Banks are not convincing with their ability to take timely precautions, and IT companies still lack the evidence to prove that they respect privacy and are capable of protecting sensitive data. Thus, we are entering an entirely new era with challenging ethical and security-related issues with e-money and virtual payment methods.
Our current monetary system is compromised by issues such as inflation, the illicit economy, and counterfeiting – this prevents people, countries, and governments from working together as they should be. The banks are printing money out of thin air and profit from doing so. We are witnessing how easy it is to defraud, cheat, and lose money in the current financial system. We are coming closer than ever to a financial revolution, which offers innovative ways to restructure an economic system – money will disappear and be replaced by something else – like cryptocurrencies.
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