Human civilization made numerous inventions throughout its historic and prehistoric years. One of the most significant inventions throughout history is money. The invention of money gave new meaning to how people transact and trade, build civilizations or fight wars. Development of trade would have never taken place, without the invention of money. Before money, there was the barter economy around 100,000 years ago. This was a special type of economy where two people would exchange their goods. This type of trade had its limits as sellers and buyers couldn’t always find the desired and needed products in order to exchange them on their own the so called, (coincidence of wants) and progressively this led to the creation of money. Another reason was that these objects could not be easily transported or used in daily transactions. Due to these reasons and in order for trade to become efficient, they needed to use something that is durable and valuable i.e. holds its value over time, it is portable and convenient to use and is generally accepted by the population as a means of transaction.
Before the invention of metal coins, means of payments took many forms where hundreds of objects were used as money. Cattle, barley, and wheat were used in the ancient societies of Mediterranean and near East. By the end of Stone Age and with the rise of metallurgy barter economy was gradually replaced by metals like gold, silver, tin, and iron which were used as standards for trade transactions and also to pay taxes at these early societies.
People in Asia (China) used copies (replicas) of copper and bronze cowrie shells as a primitive form of coins. The first coins were created in Asia Minor in 600 BC by the Greeks in Ionia (or 687 BC according to Aristotle and Herodotus), that was close to the city of Ephesus. After 600 BC, silver and gold coins spread in the city states of Ancient Greece, the Greek islands and the eastern Mediterranean, engraved with the crests of their cities. Throughout this period, the final stages of the inventive progression of the modern-form coins were completed.
From the birthplace of Ionia, the production methods and the use of coins were spread to the western Greek colonies like that of Sicily and to the Persian Empire in the east. Northward it was also Macedonia, Thrace, and the Black Sea that adopted the new invention. Mainland Italy also followed the coin adoption but at a slower pace.
The Greek city-states competed to produce the best coins, with the Greek bankers becoming the world’s most expert money-changers. A further massive stimulus to commerce took place during the era of Alexander the Great who took advantage of the huge Persian gold and monetized it.
Even before the conquering of Greece by the Romans, the kings and governments of ancient Rome controlled strictly their production also in order to avoid counterfeit coins. With the expansion of the Roman Empire more coin factories (mints) were created and as a result, the Roman coins were generally accepted throughout the Roman Empire and the Mediterranean.
During 1290 AD the travels of Marco Polo to China brought a new revolution to money creation. It was the paper money (banknotes) that Chinese had been already using since Song Dynasty (960-1279 AD). However, in the west, the first paper money printing took place 1661 AD in Sweden from Stockholms Banco. The ease of use of the banknotes was proved a commonly accepted transactional practice and was mainly favored by businesses. This shift to paper money gave a boost to international trade but the increased competition between currencies and governments also led to the so called currency wars.
The further development of the English banking made the use of banknotes more sophisticated and with the bigger and most credit worthy banks to be widely accepted. These banknotes could be converted to gold and silver but in order to immunize the transactions from bank failures and bankruptcies, bank notes started being authorized and controlled by national governments.
In the last 70 years money and modern banking gave rise to new technologies like credit and debit cards, and right before 2000’s the first mobile banking took place in the very first primitive predecessors of smartphones. After 2007 we saw the contactless payments, mobile payments through smartphones and applications like PayPal, Samsung pay or Apple pay and of course the virtual cryptocurrencies like Bitcoin which became the first decentralized cryptocurrency back in 2009. Many security, regulatory and legal concerns follow the recent currency innovations and are something that is “work in process” before a more global adoption.
Despite the recent innovations and progress in money creation mechanisms, we will always have to monitor the standard functions and characteristics of money. Money therefore should be a “medium of exchange” that means that money is widely accepted as a method of payment, a “store of value” that means a currency should hold its value through time (although inflation will finally erode the money purchasing power through the years) and a “unit of account” that means money should be a common measure of value across the economy. There are also more to add here but as technology progresses, the mechanisms to define and control what money is and what is not, become more technical both from a technological, ethical and legal perspective.