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Considering anatomical modern humans arose 300,000 years ago with behavioral modernity about 50,000 years ago, attempting to explain the evolution of money is more appropriately placed in a book rather than a blog. With that said, this blog can demonstrate some intriguing examples of what has been used as forms of money and trade in the past and present. This blog will hopefully also emphasise the real possibility of an upcoming monetary transformation as we propel ourselves into the digital age.
Recently, Canadian politician, Pierre Poilievre, correctly stated that “money is merely a technology by which we transport value over time and space”. Both technology and value are key words when discussing the evolution of money because of its subjectivity over time. What was considered valuable 5000 years ago is not today and what is valuable today will be questionable in the near future.
Beads and seashells are a good example of explaining some of the earliest forms of money because it captivates the level of technology at the time. Beads and seashells were considered valuable because, unlike food, it wasn’t perishable, nor would they decompose easily. Handling and transporting was rather simple and effective due to its small size, and its similar weight made it easier to determine the value of a payment. But evolution is all about adaptation and due to the disparity of supply and demand of beads and seashells across the world, in combination with the beginning of minted coins in Greece, they were no longer a valuable form of money.
This is an interesting example of how institutionalisation creates its own society and rules, including and especially trading and exchanging goods. These fundamental principles of what constitutes money remain the same, it just adapts to the environment. Cigarettes in prison share similar characteristics to beads and shells: durability, easy transportation, and divisibility. Convenience is also a big factor when determining a medium of exchange, for instance, you wouldn’t want to be exchanging shoes in prison because a) they’re heavy and b) they are needed for your feet.
Sweets at school share similarities to cigarettes in prison because not only are the environments institutionalised, they also use a medium of exchange that holds value to their own community. The only difference is the thing itself they have identified as the store of value. In this case, sweets were naturally chosen as the form of money because they should hold value over time. That is of course unless children decide to stop liking sweets overnight!
Technology was a huge factor in the development of establishing sound money and adopting reserve currencies. As mining for metals began, people soon became aware that certain metals were scarce and unique, thus its name precious metals. Gold was soon recognised as the global unit of account because of its unique characteristics. There were small amounts scattered across the world, it could be made divisible into coins and became somewhat difficult to tamper or destroy. Its only drawback lies with its bulky weight and transportation limitations.
This brings us to the current form of money we have in 2022. Fiat is another word for government-printed money, which was once a paper receipt backed by Gold. However, as countries left the gold standard, we now operate under a system of confusion as to the known supply limit of our currency, which in turn questions the ultimate value of the thing we’re holding and trading with. Despite the fact that humans, in particular banks and governments have made mistakes, and will likely make more in the future, it should be acknowledged that humans also solve problems, create and innovate new things and thereby rectify oversights.
Technological advancement eradicated the need for beads and seashells, just like our desire for convenience no longer requires us to luggage hundreds of tonnes of gold across the world to exchange our goods. However, these changes have come at a cost in the form of currency debasement and rising inflation.
More people today, including myself, have an alternative proposition. This is one that is aligned with the properties of sound money including transportation, divisibility, fungibility, and scarcity. Bitcoin embraces the inevitability of the digital era and offers payment settlements to be made across the world at the speed of light and for free. Its supply limitation of 21 million makes it incredibly scarce. Each Bitcoin is divisible 100,000,000 times and its digital energy makes transportation effortless. I am confident in the future we will see the full capabilities of digital assets such as Bitcoin come into fruition and ultimately co-exist alongside the US dollar, creating more innovation and optimism across the world.
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