Blockchain Blog 01: Cryptocurrencies, Is it needed?

Aakash S


People always have a love-hate relationship with money. But what, exactly, is money? Money is a tool of trade. Money is an invention that allows us to trade the goods we create and the services we offer more easily.

Money as a paper is good for nothing other than to trade products and services. By themselves they are worthless. The dollar has worth because of what it represents, and not what it is. In another word, money represents the very best things that people have to offer each other, in exchange for the goods and the services that people produce. With money, people can exchange what is best in themselves, talent, or any kind of offering they have. The more you offer to the world, the more value you will get in trade, the more value you offer, the more trade will you do.

Barter System to Currencies

So what was there before any kinds of money, or currencies? Have you ever wondered how money came into existence? The use of metal for money can be traced back to Babylon before 2000 BCE, standardized and certified coinage may not have existed until the 7th century BCE.

Before that, there would have been a barter system. Different types of work like weavers, cobblers, farmers, tailors, etc. existed in the community.

Imagine there is a cobbler named Vijay, and a farmer named Raj, when Vijay needs vegetables he goes to Raj and exchanges a pair of slippers for the vegetables he needs, both are happy, this is known as the barter system, the system by which one person could exchange goods and services produced by him with goods and services produced by another.

But does the barter system always work? The problem with the barter system was that it works on the double coincidence principle, two coincidences have to happen. One is that you should find someone who’s will sell what you want and the second is that the seller wants something that you’re willing to sell. The direct exchange of one commodity for another requires direct satisfaction of both parties.

Now Vijay needs more vegetables and goes to Raj, but Raj doesn’t need more footwear hence no barter takes place.

Now Vijay needs a haircut and goes to Billu the barber but the value of the haircut is much lesser than the value of a pair of slippers and the slipper cannot be divided and hence no barter takes place.

Vijay needs milk but the quantity of milk to be received in exchange for a pair of slippers is very harsh and with milk being perishable Vijay doesn’t want to take too much of it hence barter does not take place.

Thus the exchange of goods was not easy. Imagine the confusion that’s why the barter system gradually ended, But what was the alternative around the same time? Metals were discovered and took over the ancient world in the 6th century bc the first coins resembling the current ones appeared, they were small metal pieces with fixed weight and values and bearing an official seal which is the mark of the government or a kingdom that has minted them and also a guarantee of their value, the first metals used were gold and silver.

Then other metal coins replaced all the currencies after the formation of the Central Banks. These banks issued notes and coins on behalf of the government.

Since then with innovation, we have progressed a lot and now have many digital payment options like credit cards wallets online transfer facilities thus moving from a cash to a cashless society.

Forget about going back to the barter system, even a society with paper notes looks older now, and a cashless economy is a way to go.

In the past 100s of years, we have done significant improvements in many aspects of life because of technology and innovations. But not much change in one aspect of our economy, which has not seen a significant improvement of change due to technology, It’s our currency.

The transition from barter systems to metal-based currencies would have been a very slow process. Similarly, the transition from metal-based currencies to paper notes, and now to digital currencies was not that sudden. It was only after we had proper tools, and technologies we were able to shift our economic gears.

So now the question is, are we in a time where we again need to think about the ways we exchange our offerings with people. Is it time to shift our gears from today's fiat currencies to cryptocurrencies? Is there any problem with today’s Fiat currencies? Is cryptocurrency a future of exchanges? We will explore more about fiat currencies and cryptocurrencies in the next part of the blog. Stay tuned.