Evolution of Monetry System - must readsteemCreated with Sketch.

in #money6 years ago (edited)

Have you ever thought how strange the money is? Since the beginning of time and the creation of human beings, the three basic needs has been Food , Clothing & Shelter. Small pieces of metal or paper pass from one person to another for meeting the basic needs. Today in the payment system ,we don't need anything physical at all. Technology has become improved that money has become a stream of 1's and 0's endlessly circling the earth. How did this happen , lets find out as we discover the evolution of money.

Ever since there has been a need for an exchange system where they could avail and meet the above basic needs. Every one have to earn and work out a way to have acquire them.

The exchange systems started from batter system to modern day electronic payment system and now the transformation to the Blockchain based payment system. Each and every time when one system was not able to adapt to the requirements of the exchange process, the system kept on upgrading taking into consideration the difficulties defects and disadvantages it had to face, as an exchange medium for meeting the basic needs

The money evolution can be classified into 5 stages

Batter System

This mode of exchange started during ancient days from the days of the caveman era. The needs were very limited. Goods were exchanged for services. No wealth creation in this system and was limited to a particular localized area. Various commodities were used as exchange like cattle's,fish,grains.A farmer who has excess corn would give some corn to a fisherman and buy some fish. It had few disadvantages as it was not able to do foreign trade. Goods were perishable

Metallic Money

Started by kings and traders.The downfall of batter system era lead to the next stage of evolution known as the Metallic money.The first real use of coins dates back to 500 - 700 BC in India and China these were coins made of gold (high value) silver (moderate value) and other metals like copper /Bronze (low value generally used for day to day purchases) . coins were assigned value according to the content of gold and silver . this made transactions fast and easy. it had disadvantages like it was bulk to carry around.

Paper Currency

Also known as fiat currency. Paper money was developed by Chinese in 700AD. Carrying Gold and Silver around was a dangerous activity. Since people realized it's value the 'evils' begin to emerge. As a solution the first ever banking systems came in to place. This, however, is unlike any banks of today. In this era the bankers were the goldsmiths.People owning Gold or Silver began to leave them at a Goldsmith and take a written note certifying to the value of the metals he has placed in Goldsmith's custody. So the owner could use this written note as a certification of the value he owns and make purchases with it.These Goldsmiths later on initiated the banking function that still exists to date. Latter on governments took control of the paper currency. Legally recognized to settle all debts and payment within territorial jurisdiction. it was pegged to gold. $1 = 22 grains gold
During world war 2 this system collapsed. After WW2 Fiat Money was formatted as Paper standard. Central govt was free to print currency without gold backing. Exchange rates was fixed for various currencies. Issues started like over printing, hyper inflation, still bulk to carry, change problem(returning fractions), theft and counterfeit started to increase. As trade and commerce increased, people started becoming rich but it was virtually impossible to posses vast amount of coins as they were very bulky, so people during early medieval time in far east ,started developing paper money as paper is a material lighter than coins and so they could be carried easily from one place to another and the speed of trade would increase.

Plastic Money

When digitization of information and data process started, banks took advantage and digitized their account. Also the age of computer and internet created a favorable atmosphere for creating pplastic money. Plastic money are of two types 1. Credit card 2. Debit card. ATM started to develop and plastic money could be converted in cash through this machines. Plastic money are swiped for transaction and nothing but transaction could be done. it has become a symbol of modernity. Modern shops ask for creditcard except from people who dont have it. Only bank balance could be transferred and not plastic card itself. It is portable ,durable and divisible. In 1946 the world's first chargecard was introduced which lead to bank americard which is now know as Visa/Master cards. In 1980's money entered the digital age with introduction to automated teller machine(ATM). As internet grew,there were more services that could be bought online that created a need for a digital online transaction.

Present Banking System
I am not sure if you realize, but we never ‘see’ or ‘touch’ money in most of the transactions that we do today. They are stored in digital ledgers of banks and financial institutions. Thanks to the increased penetration of the internet and digital devices, money transactions can take place almost any time, anywhere in the world.In case of paper money or any physical abstractions of money for that matter, it is easy to trade over the counter. You simply hand over the money in exchange of any goods and/or services. Simple. But digital money is complex.

Let us try to understand how digital transactions work. Tom wants to transfer $100 to his friend, Bob.
Money in Tom’s bank account is recorded in a digital ledger.
To transfer money to Bob’s account, Tom requests his bank to initiate the transfer.
Tom’s bank verifies if he has enough money, deducts money from his account and updates their ledger. Tom’s bank then initiates an electronic transfer to Bob’s bank, with his bank details.
Bob’s bank receives the electronic transfer and updates their ledger.
Bob’s account is credited with $10. And all this could take between a few minutes to a day depending upon the source and destination banks, time of initiation etc.I know that you know all this. But bear with me for a while.If you ever intend to transfer money overseas, good luck to you. Depending on your luck, it may take between 3-5 days for the money to travel (frustrating, isn’t it). Heck, why does it take so long? The reason is that there are one or more intermediary banks that are needed to route the transaction. All of the banks maintain their own ledgers. And it takes a long time for the money to hop through the ledgers. But 3-5 days? Someone needs to explain that to me!And then there are hefty transaction charges. To put some context, the global remittance (excluding FDIs and private capital flows) is to the tune of US$ 500 Billion per annum.

And have you heard of Western Union? You may not have used their services. But millions of people who are employed overseas who are not connected with the mainstream banking, use their services to remit money back to their homes. And do you know how much the Western Union charges them? 1%...2%...3%,.... NO. The transaction charges these poor people have to bear is in double digits! If you ask me, that is robbery in plain sight.But is there a way to transact safely without bringing in a central body and avoid a single point of failure? Who will maintain the ledgers and ensure they are kept and managed accurately?
Can we somehow build and maintain trust in a decentralized and distributed fashion?
Yes the next generation evolution of money solves all the issues that is currently faced by the present monetary system - Solution " Cryptopcurrency !!

Cryptocurrency

Cryptocurrency is a new revolutionary type of currency. Due to increased dollar supply dollars purchasing power decreased. Banks charges fees online transfer, credit cards and atm. Then in the recent times a new phenomenon has evolved - cryptocurrency. You may know it better as bitcoin. this type of currency is decentralised, meaning it is stored across the entire internet and is owned by nobody. Like any other currency or unit of account, they only have value because people give it value. Cryptocurrencies were designed as a unit of exchange and as a place to store assets without relying on a Central Bank, thus cutting out the middle person with lower fees and faster transactions time.A move towards a more direct money transaction without having other people take a cut of your hard-earned cash.

So, it seems we’ve come a long way from trading goats for wood. While they once dominated, banks are becoming increasingly less important to our daily finances. We started with a cashless society, and with the rise of chip and pin and contact less payment, cash is on the decline. What does the future hold? Will we cease trading in physical money and go completely digital? Or will we come up with an even stranger way of buying the things we want?

Did you Know - "Early roman soldiers were paid in salt - that is how the word salary was derived

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