Currency is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The main functions of money are distinguished as a medium of exchange, a unit of account, a store of value, and sometimes, a standard of deferred payment. Any item or verifiable record that fulfills these functions can be considered money.

Money is historically an emergent market phenomenon establishing a commodity money, but nearly all contemporary money systems are based on fiat money. Fiat money, like any check or note of debt, is without use value as a physical commodity. It derives its value by being declared by a government to be legal tender; that is, it must be accepted as a form of payment within the boundaries of the country, for “all debts, public and private”. Counterfeit money can cause good money to lose its value.

We want to go back hundreds of years and look at why humans felt the need for a unit called money. Please follow the digital currency signal till the end of this article.

Check money history

Check money history
why do humans feel the need for a unit called money

In this article, we want to go to an interesting and audible story, the story of money. We want to go back hundreds of years and look at why humans felt the need for a unit called money. For those of you who are currently reading this article and have stock in your wallet and credit card without any problems, it may be hard to believe that in the past people used to buy precious stones and coins that weighed a lot. And used to sell and meet their needs. The history of money is one of those fascinating and audible stories that anyone who wants to enter the world of capitalism and investment should be familiar with.


Money can be considered the main factor in the economic situation of a country. The amount and amount of money have a direct impact on the economic situation of a country and have a great impact on inflation, interest rates, unemployment, and production. In the following, we will briefly describe the evolution of money from thousands of years ago to today

Money time history

  1. Commencement of trade (1200 – 9000 BC)
  2. The advent of coins (400 AD – 1200 BC)
  3. Paper money (present – 400 AD)
  4. Gold-based monetary system (2007-1816)
  5. The emergence of digital currencies (1860-2007)
  6. Today’s digital currencies (present – 2007)
  7. Crypto Currencies

Types of Money

Although money can take an extraordinary variety of forms, there are only two types of money: money that has intrinsic value and money that does not have intrinsic value. Commodity money is money that has value apart from It’s used as money. they are the most widely used forms of commodity money.

Gold and silver can be used as jewelry and for some industrial and medicinal purposes, so they have value apart from their use as money. The first known use of gold and silver coins was in the Greek city-state of Lydia at the beginning of the seventh century B.C. The coins were fashioned from electrum, a natural mixture of gold and silver. One disadvantage of commodity money is that its quantity can fluctuate erratically.

money in the United States

Gold, for example, was one form of money in the United States in the 19th century. Gold discoveries in California and later in Alaska sent the quantity of money soaring. Some of this nation’s worst bouts of inflation were set off by increases in the quantity of gold in circulation during the 19th century. A much greater problem exists with commodity money that can be produced. In the southern part of colonial America, for example, tobacco served as money. There was a continuing problem of farmers increasing the quantity of money by growing more tobacco.

The problem was sufficiently serious that vigilante squads were organized. They roamed the countryside burning tobacco fields to keep the quantity of tobacco, hence money, under control. (Remarkably, these squads sought to control the money supply by burning tobacco grown by other farmers.) Another problem is that commodity money may vary in quality.

Given that variability, there is a tendency for lower-quality commodities to drive higher-quality commodities out of circulation. Horses, for example, served as money in colonial New England. It was common for loan obligations to be stated in terms of several horses to be paid back. Given such obligations, there was a tendency to use lower-quality horses to pay back debts; higher-quality horses were kept out of circulation for other uses. Laws were passed forbidding the use of lame horses in the payment of debts.

This is an example of Gresham’s law:

the tendency for a lower-quality commodity (bad money) to drive a higher-quality commodity (good money) out of circulation. Unless a means can be found to control the quality of commodity money, the tendency for that quality to decline can threaten its acceptability as a medium of exchange.

But something need not have intrinsic value to serve as money. Fiat money is money that some authority, generally a government, has ordered to be accepted as a medium of exchange. Checkable deposits, which are balances in checking accounts, and traveler’s checks, are other forms of money that have no intrinsic value.

They can be converted to currency, but generally, they are not; they simply serve as a medium of exchange. If you want to buy something, you can often pay with a check or a debit card. A check is a written order to a bank to transfer ownership of a checkable deposit. A debit card is the electronic equivalent of a check. Suppose, for example, that you have $100 in your checking account and you write a check to your campus bookstore for $30 or instruct the clerk to swipe your debit card and “charge” it $30.

In either case, $30 will be transferred from your checking account to the bookstore’s checking account. Notice that it is the checkable deposit, not the check or debit card, that is money. The check or debit card just tells a bank to Transfer money, in this case, checkable deposits, from one account to another.

What makes something money is found in its acceptability, not in whether or not it has intrinsic value or whether or not a government has declared it as such.


In Money and the Mechanism of Exchange (1875), William Stanley Jevons famously analyzed money in terms of four functions:

  1. medium of exchange
  2. common a measure of value (or unit of account)
  3. standard of value (or standard of deferred payment)
  4. store of value

By 1919, Jevons’s four functions of money were summarized in the couplet:

Money’s a matter of functions four:

  • A Medium
  • A Measure
  • A Standard
  • A Store

This couplet would later become widely popular in macroeconomics textbooks. Most modern textbooks now list only three functions, the medium of exchange, the unit of account, and the store of value, not considering a standard of deferred payment as a distinguished function, but rather subsuming it in the others.

There have been many historical disputes regarding the combination of money’s functions. Some argue that they need more separation and that a single unit is insufficient to deal with them all. One of these arguments is that the role of money as a medium of exchange conflicts with its role as a store of value: its role as a store of value requires holding it without spending, whereas its role as a medium of exchange requires it to circulate.

Others argue that storing value is just a deferral of the exchange, but does not diminish the fact that money is a medium of exchange that can be transported both across space and time. The term “financial capital” is a more general and inclusive term for all liquid instruments, whether or not they are a uniformly recognized tender.

Trading system

As many of you have probably read in the history books of your school days, early civilizations used the commodity-to-commodity system to exchange and procure the equipment they needed. The process was very simple, in exchange for delivering a product, they would take the equipment they needed and replace it. At that time there was no need to do complex calculations and all trades were calculated mentally.

Physical money

Physical money
animals were used as a currency

The growth of civilizations and the increase of trade changed the way of buying and selling in the form of trade. In the next system, the people of each region chose a specific physical commodity for themselves and used it as the basis of their exchanges. For example, in some places, horseshoes were used as a currency, or in some other parts, jewelry was considered as a currency.

Gold coins

The physical money used at that time was not as universal as it is today, and each commodity was in part selected and valued as a currency, and the same commodity had no value elsewhere. This created many problems. These problems, for example, made trading very difficult for merchants because every point they entered had its monetary system, and the systems did not accept other areas.

Therefore, it was necessary to create a global monetary system as soon as possible and to determine a global origin and basis for buying and selling. Eventually, gold and silver were chosen and used as world currencies. At first, coins were made from molten gold, and after a while, coins were made from other metals. Coins were used as the global financial system for many years until the modern era and the advent of banks.

Money supply

In economics, money is any financial instrument that can fulfill the functions of money. These financial instruments together are collectively referred to as the money supply of an economy. In other words, the money supply is the number of financial instruments within a specific economy available for purchasing goods or services. Since the money supply consists of various financial instruments (usually currency, demand deposits, and various other types of deposits), the amount of money in an economy is measured by adding together these financial instruments creating a monetary aggregate.

The modern monetary theory distinguishes different ways to measure the stock of money or money supply, reflected in different types of monetary aggregates, using a categorization system that focuses on the liquidity of the financial instrument used as money.

Fiat currency

Online banking and intermediaries
Online banking and intermediaries

With the advent of banks, banknotes and paper money were also printed and marketed, creating the first Fiat currencies. It supports Fiat gold and silver currencies. This support means that for printing currency and banknotes, there should be as much gold or silver in the warehouses and reserves of central banks. If this balance is not observed, many financial problems will arise Online banking and intermediaries

With its advent, the Internet has been able to solve many problems for the people of the world and the banking systems. One of the most useful applications of the Internet is online banking. With the advent of online banking, there is no need to go to the bank in person for every small task, and users can sit at home and do their banking using their computers and mobile phones.

Of course, online banking was not in its original form today and had many problems and limitations. One of the problems in the early years of online banking was payment restrictions between other countries. People could not make their purchases from other countries and had to pay into domestic accounts. So there had to be a way to solve this problem.

Finally, in 2001, PayPal officially launched a service that allows online payments to be made around the world.

Yuval Harari

In his book Sapiens, Yuval Harari writes about money:

Money is made in many places and times. Such development thus does not require any tools. Because this change is a kind of mental revolution. Creating a currency is a mental need and reality that is rooted in people’s minds and imaginations.

No money, coins, or banknotes. Money is something that people consciously use for their exchanges and get what they need in return.

According to evidence and, of course, history books, the story of money dates back thousands of years and the time of the hunt. These issues and histories are so great that it can be said that they cover almost ninety percent of human history. At that time, human beings were versatile and there was nothing they could not do. Humans thousands of years ago had all the skills needed to survive.

By definition, the image may subconsciously form in our minds: a cave in a quiet, remote place where a first human being tries to provide the necessities of life by selling snakeskin to another human being. Maybe he wants to get boar meat for himself in return. Today, such an exchange is called a commodity-to-commodity system or barter. This system was the first monetary system and was accepted by all people at that time.

Items that were not sold

We used the accepted term because David Graeber, a well-known human being, believes that concepts such as commodity-trading or barter did not exist in his early days before the advent of money. Even if it existed, it was not as every day as it is today.

Imagine what if you had a product that you did not buy. This would jeopardize your survival and you might not be able to last long. Or think about what would happen if the product in your hand was a mammoth?

Could you pursue it everywhere to buy and find someone who needs it?

Family breadwinners

Near the end of the Ice Age, which is about the fourth geological period and occurred ten thousand years ago, the localization of wheat, grain production, as well as animal husbandry intensified. This happened at the same time as population growth and monogamy.

The result of such localizations was the emergence of agriculture. It was at this time that communities gradually formed as the population concentrated at one point. With this, one no longer needed to know everything, and the need to learn all the techniques became less common than ever. Instead, people became professionals in one or more jobs instead of being familiar with everything.

Differences in needs

Some chose agriculture and became professionals, and some went into other jobs such as tailoring. It was at this time that a profession called accounting was formed. The resulting system had a very big drawback. If everyone was just learning one thing, they would be in trouble. The reason for this problem was also clear. A clothing trader could offer farmers clothes in exchange for wheat, but the farmer did not need new clothes. Because the farmer did not need clothes every day, the merchant needed wheat every day to survive and eat.

A tailor or merchant, to be able to prepare food in this system and bring bread to his table, first had to go through a long process to be able to exchange his product for something valuable to the farmer and in return Give it wheat. The concept of bread-making came from here and the attempt to bring bread to the table was formed.

Ancient rules for determining money

The need for a well-defined and controlled financial system paved the way for the emergence of money. Money set a clear standard for measuring the currency of goods. The next issue that was solved with the emergence of money was the difficulty in buying and selling goods for goods. Of course, the advent of money from the beginning was not as you imagine now, and it was a long way from the advent of paper and coins.

Originally, the paper and coins we now use and love did not exist at that time.

The Oyster shell was one of the first and most popular forms of money at that time, which was widely used in Africa and Asia. These oysters were so popular in Africa that they were used in countries like Uganda until the 19th century.

Prehistoric banks

Prehistoric banks
Early and prehistoric banks

Early and prehistoric banks first emerged in the Mesopotamian region. In these early banks, people borrowed their valuables.

With the advent of this system, the need to create and record reports seemed mandatory. It is logical that after the creation of such a mechanism, it will not take long for a central organization and a general office to emerge.

Of course, the creation of money did not start in Mesopotamia and its origin was another region. It has not been easy at all to choose a currency in Mesopotamia and then globalize it.

Like today’s world where there are many currencies around the world, there were many currencies at that time and oyster skin was not accepted everywhere. Cereals, clothing, and some other objects were valued as a currency.

It may be said that these currencies differed in form and value, but their main features were common.


All selected currencies were physical. Non-physical ideas and concepts can never be used as a currency. Of course, ideas indeed had a great impact on the creation and creation of money, but they can never be a direct currency themselves.


They were physically stable. Just because an object was tangible did not make it a currency. But other factors became the currency. For example, if a community used the leaves of trees for its currency, everything would be destroyed by the wind. Or another problem, can you put a hundred leaves in your pocket, for example?


Society must accept them. Even if both of the above are met, people still have to accept it to become a currency.

If people are not satisfied, where do you want to prove that you have a currency? If there is no public acceptance, everyone chooses something for themselves as a currency, which is practically impossible.

Finding a device that meets the first two features is not a big deal, but the third is a bit difficult. The stability of a currency cannot be guaranteed without the acceptance of the people. Coins were invented around 600 BC, and the third problem was solved.

Coins and the possibility of benefiting from central supervision

There was one problem with choosing cereals as currency, and that was that you could plant cereals and withdraw money. This problem was not limited to grains but also other common currencies at the time, such as oysters. You could go to the beach, sunbathe and make money. In fact, with this system, anyone could plant money and increase their capital at any time. Such a system could not be trusted. This was a problem that was solved with the invention of coins.


People in the Lady area were the first people to mint coins in ancient Greece. Later, about 500 years later, larger cities such as Athens did the same thing and struck coins. Unlike grains and oysters, which you could find whenever you tried, you could not plant coins or pick them up from the shore. The gold and silver needed to mint coins were not something that could be easily found in nature. Even today, only certain banks and centers can do this.

Each coin needed to have its specific name and logo. So the rulers began to engrave their faces on the coins. Of course, the image on the coins was not just the faces of individuals, national emblems and the like were also engraved on the coins.

In fact, by doing so and engraving an image on the coin, they were guaranteeing that the coins were valuable. For example, their coins were valuable as long as the rulers were in power.

In this way, the production process and the money cycle came under the control of the rulers.

The advent of paper

Coins indeed caused many problems to be solved at that time. But the coin was still not without its flaws, and it had its problems.

Coins, for example, had to be made of precious metals such as gold. The more coins were produced and made available to the public, the less access to resources such as gold and silver. In addition, the coins were relatively heavy and also took up a lot of space. This made them difficult to carry. It was these problems that led to the emergence of paper.

The first paper samples

The first paper samples were invented by the Chinese around one hundred years BC.

Shortly after the invention, the first use of paper took place. Instead of carrying large, heavy coins, people would give their valuables to banks and receive signed paper in return.

Such an action was based on trust. In this type of mechanism, objects were given to people in exchange for signed papers.

In this system, signed papers were exchanged instead of goods being exchanged with each other.

Mongols and paper production technology

Mongols and paper production technology
After the Mongol invasion of China, they plundered China.

After the Mongol invasion of China, they plundered China. In the meantime, they acquired the paper production technology that was in the hands of the Chinese at that time. Paper money was introduced to Europe in the 13th century by Marco Polo.

In the seventeenth century, many goldsmiths used paper to buy and sell bonds. These bonds were guaranteed and supported by the gold they possessed.

After a while, little by little, all the people used paper and paper notes to do their business. It was at this time that European banks began producing and selling paper banknotes.

These banknotes supported all valuables such as gold and silver and did not require a separate paper for each.  This was the first use of money in its present form.

Moving money

Gold and silver behind currencies cannot be bought back today. Of course, this was not always the case. Until the 1930s, the situation was different. At the time, every dollar bill printed had a $ 0.04 gold backing. In fact, unlike the Europeans, the Americans believed that one day the whole population might want the value of their money. For this reason, they were a little complacent about the value of gold behind every dollar.

This was done at a time when the economic situation in the United States was not very good that decade. The Great Depression occurred in 1929 and the stock market plummeted.

Reviving the economic situation

In this situation and the very severe economic recession, a way had to be found to revive it.

Franklin de Roosevelt, then President of the United States, decided to print banknotes to revive the economy.

Unfortunately, there were problems with this. First, the amount of gold available was limited, and second, it was not possible to raise taxes due to the severe recession in society. As a result, due to the lack of sufficient gold resources, it was not possible to print banknotes.

This great recession caused many people to seek gold and seek gold. Fearing that their entire economy would collapse, people turned to the banks and formed long queues. As we mentioned, there was only $ 0.4 in gold reserves per dollar.

Roosevelt and the change of illegal ownership

That is why Roosevelt was forced to take illegal action in 1993. He changed the ownership of all available gold to his name.

He also closed the banks for three days to prevent them from leaving the banks. The personal ownership of gold was then banned for citizens. After keeping gold became a crime, its punishment was determined. Anyone who possessed gold was sentenced to ten years in prison. All people were required to hand over their gold to the Federal Reserve. Paper money was given to the people in exchange for gold.

All attempts failed

Roosevelt did his best to prevent the recession from continuing. But the recession was so great that none of these activities could stop it, and this very bad situation continued until six years later. This recession has taken a huge toll on the American people and the country.

One of the blows of the recession was that in 1971, then-President Richard Nixon announced that gold would no longer support the dollar. Of course, possession of gold was still not legal, and until 1997, the possession of gold by citizens remained illegal. The next president of “Ford” declared the sale and purchase of gold free, and his soul did not know that it was illegal!

Financial systems today

Financial systems today
The new and modern financial systems.

Now it’s time to move beyond the old coins and financial systems to the new and modern financial systems. At the beginning of the text and in the commodity-to-commodity section, we told you that these transactions were based on the value of different objects. This method later became used in oysters and cereals due to some problems. People used grains and oysters as currency.

After societies were formed and rulers came to power, it was time to mint coins. After the coins came, many problems were solved, but these coins also had two big problems. They were heavy and took up a lot of space. So it was time for paper money to replace coins.

Paper money

Paper was accepted as the common currency and was used by most people. Governments paid more attention to paper currencies.

Shortly afterward, paper currencies completely lost their dependence on precious metals. Metals that themselves valued paper currencies. It was at this time that other governments regulated the value and amount of money. Governments guaranteed the people that these papers were valuable.

Of course, paper money is not known as a currency today, and there is a lot of talk about it. Yuval Harari writes in his book:

Even today, coins and banknotes are a rare form of money. The total amount of money in the world is about 60 trillion dollars.

However, the sum of all the coins and banknotes in the world is less than $ 6 trillion. More than 90% of all money in the world is on computer servers alone. In other words, ninety percent of the world’s money is digital. Of course, you should know that this statistic is ninety percent related to 2011, and now this statistic has gone up.



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