Money and History of Money
There are many definitions about money. Money can be anything that people are using to buy and trade goods. People who are selling their own products or services are receiving money as reward for their effort to develop the product or service that they are selling. There are several types of money such as: Commodity Money, FIAT Money, Fiduciary Money and Cryptocurrencies. Before we talk about all this types we will see how the money developed over the years from the first coin to the cryptocurrencies.
In the early days, long time ago people did not buy or sell anything with money. They traded one thing for other. For example if someone has cows and he wanted to buy chickens, he had to find someone who not only had chickens but also a need for cows. What if the individual finds someone who had a need for cows but cloud only offer corn instead of chickens?
This was not the only problem even if the person finds someone who wanted to exchange chickens for cows. They might have considered that bunch of chickens were not worth one cow. The transport was also a real problem.
To solve these problems people had to find a third universal good that has value and everyone would use it as a medium of exchange. The money were born. At first people were using coins because the coins had known value and were easy to carry. The first kingdom in the world that was making coins was Lydia. The Lydian coins were made from precious stones and were stamped with a picture of a lion. This idea spread across the world and many coins were made with the same size and shape.
Lydia Coin
Money had many other advantages. People didn’t had to sell cows for chickens for example, instead they started to buy chickens with money because money are easier to divide than many other trade goods. Money last longer than any other trading goods, also the people started to save money until they needed them or started to leave the money to the children so they can use them when they grow up.
Like everything else money have also developed. In the modern era we have different types of money that we are going to discuss.
Commodity Money – it’s good that consumers use to trade for other goods. It is like the money we are using today. Gold was used as currency but is also used to craft jewelry. Commodity money are independent from any government because they have value by itself like the gold, silver, cooper etc. The Lydian coin that we discussed about is an example of commodity money.
FIAT money – money that are established by the governments and they do not have backing of commodity money. The value of FIAT money is set by the supply and demand and people’s faith in its worth. Value of the FIAT is also determent by the economy of the country where is used. The stronger the economy, the stronger the FIAT is.
Fiduciary Money – examples of fiduciary money are banknotes and coins. They value of this money is based on the trust and confidence of the holder in the issuer of the currency. It is not declared as legal money from the government so the people don’t have to accept it as a medium of exchange if they don’t want to. The issuer of the fiduciary money promises to exchange it back for a FIAT or commodity if the bearer requests to.
Cryptocurrency – Also known as crypto or digital money, they are digital medium of exchange to conduct financial transactions. By using the new blockchain technology Crypto gains decentralization, transparency and immutability. There are many types of cryptocurrency like Bitcoin, Etherium, eCredit and many more.
