Money: Where It Started and Where It’s Going
The Value of Currency
This is a question that has been asked over and over again throughout history as humans, systems, and communities adapt. From the barter and trade system to the modern digital assets of today, the definition of money is largely up for debate.
The one thing that we know is that assets and currency only have the value that we give them, and therefore are largely subject to change, adapting to the needs of society as a whole. In an attempt to make a complicated monetary system easier to digest, the historical breakdown of what has served as currency in the past can provide insight into what the future of payment systems will potentially look like.
The History of Money
One of the earliest examples of currency was the bartering system — individuals trading their goods, services, and offerings for what they needed. In a society largely focused on agriculture, this made a lot of sense, as this system allowed for specialization without losing the variety of foods and goods people needed. From there, society found inherent value in precious metals as they provided a scarce resource that was as beautiful as it was useful. The barter system then shifted from less of a product-to-product trade system and instead allowed for precious metals to be used as a source of currency to purchase goods.
As society progressed through technological advancements out of an agricultural age, the bartering system was no longer viable, and precious metals were largely too cumbersome to haul around in expectation for a potential trade. With the advent of the printing press, paper banknotes allowed for a representation of a precious metal asset without the physical weight of gold or silver. These paper assets were able to be stored in banks and carried around in smaller, representative increments to allow for convenient payments.
After Tim Berners-Lee invented the World Wide Web in 1990, payments were slowly integrated into the digital world. This allowed for the creation of debit and credit card systems that increased the ease of payments systems even further. Paper, plastic cards and online payments all became popular means to transact worldwide and have simultaneously coexisted for many years.
The Future of Payments
Digital currencies, issued and maintained using blockchain and distributed digital ledgers, have the potential to change how individuals and organizations transact value, eliminating the need for costly payment intermediaries, providing greater price stability, and diminishing counterparty risk. A digital dollar, Euro, or other currency can democratize access to financial systems and is a great option for “unbanked” populations in developing or remote regions to have the means to buy, sell, save, and invest more easily than before.
As cryptocurrencies increase in popularity, as we’ve seen thus far with mainstream institutional investment from companies like Tesla, Microstrategy, and Square, we anticipate that this payment system will only become more popular into the next decade and beyond.