They say that money makes the world go round. But how does it work, and how has it changed over time? While developing the ECO Coin, we’ve been thinking a great deal of money, past and present. From the origins of civilization up to present day, economy has gone through countless shakeups, and yet we tend to take our current way of thinking about money for granted.
So, we’ve put together the story of money: an accessible roadmap from prehistory to digital age – from cows to credit, from gold mining to bitcoin mining. The series consists of six parts, each one exploring a different age: livestock, cowry shells, gold, paper, plastic and bits.
Way back before the dawn of civilization, our prehistoric ancestors worked together in tribes, hunting collectively and sharing the spoils amongst themselves. The story of money starts when this way of life began to seem inadequate. Relying on your own labor was all well and good, but what if you needed something neither you nor your clan could get their hands on?
This was where barter came in. Barter transactions were based on trust. You knew that when you gave your neighbor a piece of meat, you would eventually get something in return. As this practice became increasingly common, people started to specialize. Instead of trying to provide for themselves directly, someone would specialize, for instance, in grain farming. They could keep some grain for themselves and trade the rest away for whatever else they needed.
The problem was that the barter system relied on a “coincidence of wants” – that is, for grain to be traded for shoes, we need one person who has grain and wants shoes, and another who has shoes and wants grain. When the shoemaker has plenty of grain already, suddenly the unfortunate farmer has nothing to offer him. What these communities needed was a universal converter that could act as the medium for trading any product or service for any other.
In short, they needed a currency. And for these early agricultural societies, the first logical choice was livestock. Cattle were the fuel on which society ran. They were durable, had practical uses, and were not so common as to be valueless. And livestock came in different sizes. One cow might be worth two goats, or perhaps five chickens. With this odd, unwieldy currency, the story of money begins.
Next week: Shells
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