In the era of cryptocurrencies, talking about money, its use and forms, is becoming more complicated and even reaches a point of conflict between crypto-enthusiasts and supporters of traditional economy. However, as money is interconnected to our lives, a careful “stroll” through the milestones of money evolution can be at least constructive if not self-explanatory. This post aims not to conclude that fiat or crypto money outweighs one another but to provide a critical evaluation about the cohesion of different forms of money throughout the history.
Human life is unbreakably linked to exchanging. As long as human beings struggle to meet their needs, the need for exchange of goods, services and labor will be in place. Having this in mind and having not yet invented “money,” humans began bartering as a form of early trade for physical commodities around 9000 BCE. However, as societies were growing, the inherent limitations of Direct Exchange became prevalent and the need of a Medium of Exchange arose. Here, nevertheless, there is a contradiction within the cycle of academics. The respected Anthropologist David Graeber and the Mises Institute have argued that credit systems and ledgers had preceded money.
In 1200 BCE, coastal regions around the Indian Ocean began to see cowrie shells appearing in trade. As trade was still not standardized due to the differences in the quantity and quality of the shells needed for a certain exchange, this system needed improvement. A group of people got together and proposed a new requirement for something to be counted as money — it had to have an inherent rarity. This new “money” should be difficult to find, otherwise everybody would simply find money lying around instead of figuring out how to add value to it by creating a good or service. Gold fits this precondition perfectly. It is hard to mine, it is storable and portable and can be melted into smaller coins. The first official currency was minted by King Alyattes of Lydia which is in modern day Turkey. For the centuries followed, coins changed in shape, mainly for practical reasons.
The development of the banknote began in the seventh century though, coming from merchant receipts of deposit during the Tang Dynasty (618–907). The fear of robberies while carrying golden coins led early banks to seek a more convenient solution. As merchants selected to store their gold with the goldsmiths of London, the notion of trust, much-discussed in cryptos, was born. Trust became a crucial factor in the selection of the bank that a merchant would store his gold supplies.
After trust, liquidity became a new financial term, as the deposits of gold were turning into loans by bankers. The interest they were receiving became a monetary income for them. This also led to the invention of bank notes.
Money itself means nothing it can be can be anything stone, metal, rubber, coin or a piece of paper. Money has no intrinsic value, and it derives its value from its properties.
Anything that we call money possesses three important characteristics:
· Medium of Exchange: Money effectively eliminates the double coincidence of wants problem that was taking place when the one party desired different good(s) than those the other was willing to provide during bartering by serving as a medium of exchange that is accepted in all transactions, by all parties, regardless of whether they desire each other’s goods and services.
· Store of value: In order to be a medium of exchange, money needs to maintain its value for a prolonged period, i.e. it must be a store of value. As a store of value, money is not unique. There are also land, works of art or even stamps as stores of value. However, money is more liquid than the aforementioned means as it is the easier way to purchase goods or services.
· Unit of account: Due to this, money functions as a common measure of the value of goods and services being exchanged.
In 2008, a debt crisis was looming. The Great financial crisis of 2008 brought to the surface the lack of credibility in the banking sector, the sector which provide both trust and liquidity to the market, the basic features of the analog economy. Cryptocurrencies and especially Bitcoin as a concept date back to 2007, but it wasn’t until 2009 that the first Bitcoin transaction took place.
With Bitcoin or other cryptocurrencies whose ledger is decentralized and exists as a computer protocol that anyone with electricity and internet can connect to, no counter-parties or middlemen to trust exist. Smart contracts take trust and faith out of exchanging with people you don’t know and make it automatic and instant by means of a decentralized digital asset ledger.
Reading the above lines, one can see the continuance from one monetary unit or system to the other. From bartering to fiat currency, a real need drove the evolution. The recent crisis and the turbulence within the financial system may show the necessity for a passing-through to a new digital era. For the conservatives, cryptos can verify the definition of money and tweak the properties of durability and transportability. It is clear that crypto is not only a new form of money, following the rules, but also a way to reinvent value. Crypto economy has its roots back to the more basic and simple form of economy, bartering, accompanied by the most sophisticated and mathematically-founded technological advancements. Though the years, the rejection of prior financial models is acceptable. However, a rejection of a new idea by default cannot be seen as best practice.
SocialPolis coin was created to address the need of an alternative financial transactions system using Blockchain technology for the social and sustainable development economy. SPL aims to go beyond another token issued within the growing token economy. SPL Coin has a broader scope. It is a social currency, a fairly new concept, also known as “alternative”, “parallel” or “community currency,” and is used to match non-demanded resources and unsatisfied needs, creating a local alternative cycle of value. Sub-actions in the framework of the social and sustainable development economy are the implementation of new modeling of cities, the distribution of human aid, and the support for the development of social enterprises, the international youth mobility and the breaking of barriers for remote working.