The History of Money: Bartering to Banknotes to Bitcoin (2024)

The terms money and currency are often used interchangeably. But several theories suggest they are not identical. According to some theories, money is inherently an intangible concept. Currency, on the other hand, is the physical or tangible manifestation of the intangible concept of money.

According to this theory, money cannot be touched or smelled. Currency is the coin, note, object, or physical representation that is presented in the form of money. The basic form of money is numbers while the basic form of currency is paper banknotes, coins, or plastic cards like credit or debit cards. Though this distinction between money and currency is important in some contexts, for the purposes of this article, the terms are used interchangeably.

Key Takeaways

  • Money is a medium of exchange with a recognized value that was adopted to make it easier for people to trade products and services with each other.
  • The history of money crisscrosses the world as various cultures recognized the need to simplify trade by introducing a single, portable token of value into the process.
  • People bartered before the world began using money.
  • The world’s oldest known coin minting site was locatedin China, which began striking spade coins sometime around 640 BCE.
  • Since then, the world adopted banknotes and moved into digital forms of payment, including virtual currencies.

What Is Money?

Money doesn't always have value whether it's represented by a seashell, a metal coin, a piece of paper, or a string of code mined electronically by a computer. With global wealth estimated to be about $454.4 trillion at the end of 2022, the value of money depends on the importance that people place on it as a medium of exchange, a unit of measurement, and a storehouse for wealth.

Money allows people to trade goods and services indirectly. It helps communicate the price of goods and provides individuals with a way to store their wealth. It is valuable as a unit of account—a socially accepted standard by which things are priced and with which payment is accepted. However, both the usage and form of money have evolved throughout history.

The History of Money: Bartering to Banknotes to Bitcoin (1)

From Bartering to Currency

Money has been part of human history for at least the past 5,000 years in some form or another. Before that time, historians generally agree that a system of bartering was likely used. Bartering is a direct trade of goods and services.

For example, a farmer may exchange a bushel of wheat for a pair of shoes from a shoemaker. However, these arrangements take time. If you exchange an axe as part of an agreement in which the other party is supposed to kill a woolly mammoth, you have to find someone who thinks the tool is a fair trade for having to face down the 12-foot tusks of a mammoth. If this doesn't work, you would have to alter the deal until someone agreed to the terms.

A type of currency slowly developed over the centuries that involved easily traded items like animal skins, salt, and weapons. These traded goods served as the medium of exchange even though the value of each of these items was still negotiable in many cases. This system of trading spread across the world and still survives today in some parts of the globe.

One of the greatest achievements of the introduction of money was the increased speed at which business, whether it involved mammoth slaying or monument-building, could be done.

In early August 2021, Chinese archaeologists with theState University of Zhengzhou announced the discovery of the world’s oldest known, securely dated coin minting site inGuanzhuang in Henan Province, China. A mint is a facility where currency is created. Sometime around 640 BCE, this facility began striking spade coins, one of the first standardized forms of metal coinage.

Millions of coins are circulating in the United States. As many as 47,250 coins are minted per minute at the Philadelphia Mint while 40,500 coins are produced per minute by the Denver Mint.

First Official Currency Is Minted

Meanwhile, further west during this era, in 600 BCE, the invention of metal coinage occurred when Lydia's King Alyattes minted what is believed to be the first official currency, the Lydian stater.

The coins were made from electrum, a mixture of silver and gold that occurs naturally, and the coins were stamped with pictures that acted as denominations.

Lydia's currency helped the country increase both its internal and external trading systems, making it one of the richest empires in Asia Minor. Today, when someone says, "as rich as Croesus", they are referring to the last Lydian king who minted the first gold coin.

Transition to Paper Currency

During 1260 CE, the Yuan dynasty of China moved from coins to paper money. By the time Marco Polo, a Venetian merchant, explorer, and writer who traveled through Asia along the Silk Road, visited China in approximately 1271 CE, the emperor of China had a good handle on both the money supply and its various denominations. In fact, in the place where modern American bills say, "In God We Trust," the Chinese inscription at that time warned: "Those who are counterfeiting will be beheaded."

Parts of Europe still used metal coins as their sole form of currency until the 16th century. Colonial acquisitions of new territories via European conquest provided new sources of precious metals and enabled European nations to keep minting a greater quantity of coins.

But banks eventually started using paper banknotes for depositors and borrowers to carry around in place of metal coins. These notes could be taken to the bank at any time and exchanged for their face value in metal, usually silver or gold, coins. This paper money could be used to buy goods and services. In this way, it operated much like currency does today in the modern world. But it was issued by banks and private institutions rather than the government, which is now responsible for issuing currency in most countries.

The first paper currency issued by European governments was actually issued by their colonial governments in North America. Because shipments between Europe and the North American colonies took a long time, colonies often ran out of cash. Instead of going back to a barter system, the colonial governments issued IOUs that traded as currency. The first instance was in Canada (then a French colony) in 1685 when soldiers were issued playing cards denominated and signed by the governor to use as cash instead of coins from France.

The gold standard was established in the 1870s. Under this rule, currency printing was permitted based on the amount of gold a country had in its reserves.

The Emergence of Currency Wars

The shift to paper money in Europe increased the amount of international trade that could occur. Banks and the ruling classes started buying currencies from other nations and created the first currency market. The stability of a particular monarchy or government affected the value of the country's currency, and thus, that country's ability to trade on an increasingly international currency market.

The competition between countries often led to currency wars, where competing countries would try to change the value of the competitor's currency by driving it up and making the enemy's goods too expensive, by driving it down and reducing the enemy's buying power (and ability to pay for a war), or by eliminating the currency completely.

Mobile Payments

The 21st century gave rise to a novel form of payment activated with the touch of your finger. Mobile payments refer to money used to pay for goods and services. They can also be used to transfer money to another individual, such as a family member or friend. This can all be done using a portable electronic device, such as a smartphone or tablet device.

This form of payment first came to prominence in Asia and Europe before moving over to North America. From payments via text message, the technology evolved to allow checks to be deposited using the camera app on smart devices.

Mobile payment services like Apple Pay and Google Pay are vying for retailers to accept their platforms for point-of-sale payments. There are also apps dedicated to this method of payment, including Venmo and PayPal.

Virtual Currency

Virtual currencies are only available in electronic form. As digital representations of money, this type of currency is stored and traded using computer applications or specially designated software. The appeal of virtual currency is that itoffers the promise of lower transaction fees than traditional online payment mechanisms do and is operated by decentralized authorities, unlike government-issuedcurrencies.

Bitcoin​ quickly became the standard for virtual currencies. It was released in 2009 by the pseudonymous Satoshi Nakamoto. All of the world's Bitcoin was worth just over $803.74 billion as of Dec. 12, 2023. Keep in mind, though, that virtual currencies like Bitcoin have no physical coinage because they are traded on exchanges.

Although Bitcoin remains the most popular and most expensive one, other virtual currencies have hit the market. They include Ethereum, XRP, and Dogecoin.

How Long Has Money Been Around, and What Were the First Forms of Value Exchange?

Money has been part of human history for at least the past 5,000 years in some form or another. Historians generally agree that a system of bartering was likely used before this time. Bartering involves the direct trade of goods and services. For instance, a farmer may exchange a bushel of wheat for a pair of shoes from a shoemaker.

When and Where Did Coin Minting Begin?

The world’s oldest known, securely dated coin minting site was locatedat Guanzhuang in the Henan Province of China. The mint began striking spade coins sometime around 640 BCE, likely the first standardized metal coinage.

When Were Coins Replaced by Paper Money?

The Chinese moved from coins to paper money around 1260 CE. By the time Marco Polo visited China in approximately 1271 CE, the emperor of China had a good handle on both the money supply and its various denominations.

The Bottom Line

The history of money is still being written. The system of exchange has moved from swapping animal skins to minting coins to printing paper money, and today, we appear to be on the cusp of a massive shift to electronic transactions. Ancient transaction forms have been co-opted: for example, bartering still occurs on the margins in some markets such as the business-to-business (B2B) space and some consumer services. The monetary system will surely continue evolving as long as humans require a medium of exchange.

The History of Money: Bartering to Banknotes to Bitcoin (2024)


What is the history of bartering? ›

Since the beginning of recorded history, humans have directly exchanged goods and services with one another in a trading system called bartering—the known history of bartering dates back to 6000 BCE. Reportedly introduced by Mesopotamian tribes, bartering was adopted by the Phoenicians.

What is the barter to Bitcoin about? ›

'Barter to Bitcoin' is a fascinating new book which looks back at how finance developed, leaving behind ancient ideas, to become the central driving force behind emerging economies and the increase in wealth.

What are the 5 stages of evolution of money? ›

There are more than five stages of money's evolution. Still, five notable stages include: commodity money (i.e., grains, livestock), metallic money (i.e., coins), paper money, credit and plastic forms of currency, and digital money.

What is the history of Bitcoin money? ›

Based on a free market ideology, bitcoin was invented in 2008 by Satoshi Nakamoto, an unknown person. Use of bitcoin as a currency began in 2009, with the release of its open-source implementation. In 2021, El Salvador adopted it as legal tender.

How did we go from bartering to money? ›

Bartering was the go-to system for centuries before the Lydians introduced coinage and the Chinese developed paper money. The Roman Empire introduced banks, and Europeans and colonials in North America cemented the banking and money supply system used by modern economies.

What is the history of money starting with the barter system? ›

The barter system likely originated 6,000 years ago. The first coin we know of is from the 7th century BC and the first paper money came into the world around 1020 AD. Eventually, medieval banking systems gave way to the gold standard, which in turn gave way to modern currency.

Why would someone want Bitcoin instead of normal money? ›

Hiding one's wealth- Some people simply do not want Nations to know everything about their assets, therefore, they use Bitcoin. Banking the unbanked- By living in a highly industrialized country, one may tend to forget that some people in the world still do not have access to banking services.

Why do people use Bitcoin instead of money? ›

Source: CoinGecko. Different currencies have different appeals, but the popularity of cryptocurrencies largely stems from their decentralized nature: They can be transferred relatively quickly and anonymously, even across borders, without the need for a bank that could block the transaction or charge a fee.

Is there money behind Bitcoin? ›

Bitcoin, gold, and fiat currencies are not backed by any other asset. Bitcoin has value despite no backing because it has properties of sound money.

How long will it take for the money to change? ›

Which money will change under King Charles? Though we'll soon get a glimpse of what our new banknotes will look like, they aren't expected to enter circulation until mid-2024. All four denominations — £5, £10, £20 and £50 — are set to be updated with the new designs.

What will be the future of money? ›

Q: What is the future of money? The future of money is expected to be heavily influenced by technology. Predictions include the rise of cashless societies, the growth of cryptocurrencies, the continued adoption of digital currencies, and the potential offering of a Central Bank Digital Currency (CBDC) by governments.

Where does money originate from? ›

The Mesopotamian shekel – the first known form of currency – emerged nearly 5,000 years ago. The earliest known mints date to 650 and 600 B.C. in Asia Minor, where the elites of Lydia and Ionia used stamped silver and gold coins to pay armies.

Who really owns Bitcoin? ›

Bitcoin remains open-source, meaning that no one has the power to own or control it in its entirety.

How many people own 1 Bitcoin? ›

However, some estimates can be made based on blockchain data and surveys of Bitcoin holders. According to data from Bitinfocharts, as of March 2023, there are approximately 827,000 addresses that hold 1 bitcoin or more, representing around 4.5% of all addresses on the Bitcoin network.

Who is behind Bitcoin? ›

Bitcoin was created by an anonymous person or group using the pseudonym Satoshi Nakamoto. Nakamoto published a whitepaper titled "Bitcoin: A Peer-to-Peer Electronic Cash System," outlining the concept of a decentralized digital currency. 1 The true identity of Satoshi Nakamoto remains unknown to this day.

Why did people start bartering? ›

Mesopotamia tribes were likely the starting point of the bartering system back in 6000 BC. Phoenicians saw the process, and they adopted it in their society. These ancient people utilized the bartering system to get the food, weapons, and spices they needed.

Why was bartering made? ›

Market actors use barter as a replacement for money as the method of exchange in times of monetary crisis, such as when currency becomes unstable (such as hyperinflation or a deflationary spiral) or simply unavailable for conducting commerce.

What did people do before bartering? ›

Prehistoric humans traded animal skins or services for food. Over time, coins and currencies began to emerge. Some primitive societies used shells or pearls as currency. In Mesopotamia and Egypt, they used gold bars, but these had to be weighed each time something was traded.

What was the problem with bartering? ›

The problems associated with the barter system are inability to make deferred payments, lack of common measure value, difficulty in storage of goods, lack of double coincidence of wants.

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