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The History of Money: the complete edition.

A Utrust series on understanding money.

Over the last couple of months, Utrust has been providing you, our beloved community, with a history of money that was, hopefully, fun to read and provided a comprehensive story of the world we live in.

Now that the series is complete, we are compiling it all into one giant article so you can easily find it and peruse it at your leisure. It was lovingly edited and curated accordingly.

We hope you enjoy it as much as we’ve enjoyed writing it.

Chapter 1 — Before Currency

We have always traded. It’s a common misconception that the idea of markets and trade are a relatively recent concept, borne out of civilization and large groups of people. This isn’t true of course, and economic interactions have existed since people exist.

A lot of what we know about them, however, isn’t true. There’s a lot of myth and misinformation regarding the origins of money and how we have brought it into existence. Sometimes, researching the history of this most important of human endeavors can seem like a huge ordeal, because there’s just




Most people just aren’t interested in the competing economic arguments about what constitutes reciprocal altruism.

This is why we have decided to produce this series. We are going to go through the whole shebang, from the seashells to the blockchain, and we are going to try our darndest to make it not boring.

The first economies worked on the basis of gifts. The “barter economy” is mostly a myth.

In the beginning, there were gifts

No, we didn’t really barter. We just gave people stuff.

Yes, the “barter economy” was never really a thing. It’s a widespread myth about the origins of economic practices that people used to barter as the main form of trade in the very beginning of our history. There’s just no evidence of this. Evidently, the absence of proof is not proof of absence. It’s very hard to prove a negative, especially when we’re talking about a period of prehistory with no records, no data, no writing.

The historical consensus, however, points to a communitarian gift system, where the spoils of fishery, hunting, gathering, etc. were freely distributed amongst small communities evenly. This allowed for the whole group to thrive, and every individual to be protected when they couldn’t contribute for some reason.

And we used bones to keep track

Because, of course, we kept track. We’re not that nice. When agriculture developed, a little more sophistication became necessary. Not everyone planted the same things, so not everyone needed the same things. And, more importantly, they didn’t need them at the same time.

A system was necessary to keep track, and… lo and behold… credit appeared.

This happened 8 to 10.000 years ago, way before any kind of actual currency existed. And we may have been doing this for longer. Credit is way older than money. Debt too, for that matter. Artifacts as old as the Ishango bone, which may be 25.000 years old, hint at some kind of bookkeeping as far in the past as the Paleolithic.

But what about MONEY?

That came later.

And, devoid of a central controlling entity, it developed in many different forms (fans of digital currencies are going to enjoy this part, I feel). Before we start telling this story, let’s see what a couple of things mean:

  • Representative money is something that has no value in and of itself, like a piece of paper, backed by an asset of some sort, such as livestock or grain.
  • Commodity money is something that holds value in and of itself, like a precious metal, jewel or cowry shell.
  • Standardized coinage is something that is specifically made, in a standardized shape and weight, to serve as a means of exchange.

All right, got it? Which one is crypto? Aha, therein lies the beauty. We’ll get to that, I promise.

Different societies came to money in different ways

The oldest examples we have of something that can fairly be considered money is in Mesopotamia (c. 3000 BCE). Barley was the staple grain in ancient Mesopotamia, and it was quite precious. Barley farmers, who had plenty to go around, could be considered wealthy men. But they couldn’t very well carry their barley with them around town to barter with every single other tradesman, now could they?

So here’s what they came up with: They took their barley to the temple, which was the most trusted institution of the time, for safekeeping. The scribe there annotated how many measures of barley they received on a clay tablet, and proceeded to give the farmer a clay token to represent every shekel (the word is the Semitic verbal root for “weighing”) of barley.

And, as simply as that, representative money was born.

This isn’t, however, how all societies first arrived at money. There are examples from Africa to India and Asia of commodity money, specifically cowry shells, being used to trade between communities where a mediator (such as the temple) wouldn’t have been practical. Cattle and salt were also used, but metal was the favorite, especially silver and gold.


There are plenty of theories, but the prevailing wisdom is that metal is durable, portable, and relatively easy to divide. Egypt used gold, Babylon preferred silver, and Bronze was widely used in China.

Representative money in bronze was prevalent in China.

The code of Hammurabi is the first set of economic rules we have

This is when things start to get a teensy bit complicated. Once you have actual money in play, you start to need rules to manage how it’s treated. In the next chapter, we are going to tell you a little bit about how the code of Hammurabi set the ball rolling for what would become the fiat.

(We’re also going to tell you about coins. We know y’all like coins.)

Some of the early versions of metal coins.

Chapter 2 — Enter the World of Coins

I know y’all can’t wait to learn about fiat money, and banks, and stonks, but before we can get to any of that, we need to understand why coins popularised one form of money over others.

Coins predate the fiat

Because you do remember about representative money and commodity money, correct? We discussed them in the previous chapter. So why did people mostly stop using pieces of paper backed by assets (yeah, we’ll get back to this one) and cowry shells in favor of pieces of marked metal?

Some nations already had functioning economies

It’s very important to understand the timings of this. We explained before how debt predated money, and in very much the same way there were sophisticated economies happening before any kind of standardized currency came into existence.

Representative money was the one that lent itself to easier regulation, so large ancient economies like Babylon (from 1760 BC) or Mesopotamia (as far back as 3300 BC) tended to prefer it, and started regulating economic activity from very early on.

So what was the problem?

Image carrying cowry sheels through vast distances.

Representative money didn’t travel

The kind of certificates that temples or local authorities used to produce to guarantee that the collateral was safely deposited with them was only valid regionally. If you intended to trade with anyone that was outside that region, there was no way to do so. People elsewhere had neither the confidence in your local authority nor the means to withdraw the actual goods you deposited back home.

Metal travels just fine, though

So if you wanted to trade with people elsewhere, you wanted something they would want anyway, regardless of whether they could trade it back for what it represents. That brings us back to commodity money, like cowry shells, or precious metals.

Precious metals were particularly favored. They are easy to weigh, relatively easy to split, you could mark them to set quantities, and they’re almost infinitely durable.

But there was a reason those didn’t catch on in the first place. They can’t be eaten. You can’t grow anything with them. Unless you’re wealthy enough that you would want to use them as jewelry or for further business, they’re really no good to you at all. And to make things worse, different people valued them differently, and without an authority ensuring their prices… you had no guarantees.

This is why you find metal money that is quite ancient (like Shang dynasty ancient), but no real monetary systems. You can find metal money in China, India, and elsewhere as early as 1000 BC.

Standardization is what changed everything

There were many baby proto-coins. There’s decent archaeological evidence that nations in modern-day China, India, and others around the Aegean Sea developed their own versions of round metal disks to use as money.

So what made Lydian coins different?

Lydia created the first stamped gold and silver coins.

Every coin you’ve ever seen descends from Lydian money

History is sometimes unfair. Lydia is an Iron Age kingdom that was located in Asia Minor (modern-day Turkey).

You’d think inventing standardized money would make you famous. People become famous for being good at TikTok, and yet…

Almost no one remembers the Lydians.

They created the first stamped gold and silver coins, and not just that: they were also the first to establish retail stores in permanent locations. Now, we could bore you to death with details about Lydian accomplishment in numismatics (they may have stamped coins as early as 700 BC!), but here’s why their idea of the coin was so revolutionary:

By stamping the metal with an immediately recognizable shape (they started with figures of animals, but would quickly start using human features as well), you made it possible to ascertain the value of every minted coin without weighing or measuring it. This would effectively create a monetary system.

The world would catch up really quickly after that

Mainland Greece, the Etruscans, and the Persian Empire (which would assimilate Lydia, whoops) were using standardized coins within one hundred years of the Lydian invention.

All of these nations would vastly expand and start trading extensively from that moment forward, and the Lydian invention would become immortal. We still use stamped round metal circles as money to this day.

One more thing!

Have you ever wondered why we used to use soft metals, like silver and gold, instead of hard metals, like iron and steel, to make money? You’d think we want the more durable and resistant materials, right? Like we do now.

That’s because of assaying, the development of which was another key moment for money.

Assaying is a simple process, by which you analyze the chemical composition of something for the presence of a specific element. Does it sound complicated? Well, sometimes it is. For some evaluations, you need a modern lab.

But not to figure out whether you’re in the presence of soft metal. Soft metals, like gold and silver, are known to leave marks on touchstones that are sufficiently abrasive. Once people figured that out, they realized how easily you could verify the quality of ingots, jewelry, and, yes, coins too.

Chapter 3: Banknotes and fiat

Quickly, what came first, the gold standard or fiat money?

Did you say the gold standard?



Well, now that we’ve put you in your place, welcome to the third chapter of Utrust’s history of money.

The first paper money appears in China, in the 7th Century

First thing’s first, though: what is fiat money?

Fiat is actually a Latin word. It’s a verb, and it indicates a command or an order. It means “make it so”, or “let it be done”. This should be our first clue about what fiat money means. It’s money that functions as money because someone decided that it would.

Who’s that someone? The government.

The government’s authority is what ensures that fiat money must be accepted for all trade within the area it governs.

Because the principal characteristic of fiat money is that it has no intrinsic or use value.

We have talked about three kinds of money before, if you’ll remember. Representative money, commodity money, and standardized coinage. That’s all in the first chapter.

Fiat is different from all of them because it is not pegged to anything of value, and it is not an object that is valuable in and of itself.

So how about those banknotes in China?

The Chinese government monopolized their issuance in the 11th Century

Before this happened, you could speak of paper money, or banknote-like money (quite the invention, by the way, coins had been the rule for centuries), but you couldn’t speak of fiat. Since the government didn’t vouch for their value, banknotes before the 11th Century were more likely than not representative money, pegged to copper coins. Metal coins are heavy, evidently. This meant that some people, those wealthy enough to own a large amount of them, didn’t want to carry them around on commercial trips. They would deposit them with a trusted party, and get a voucher in return. This voucher could then be exchanged back.

And so it was for around 400 years. Banknote-type vouchers circulated alongside copper coins in China. You could speak of paper money, but not of a fiat.

Then the government realized this was an excellent way of replenishing its coffers.

The government started issuing their own paper vouchers in exchange for people’s coins, ensuring anyone using them that they could exchange the vouchers for specie whenever they liked.

But wait.

Doesn’t this make these notes representative money, not fiat?

It’s debatable.

Theoretically, the vouchers were exchangeable for coinage (or even other materials, like silk), but, in practice, this was never allowed. By the time the Yuan dynasty came along (1271–1368), these exchanges were banned entirely, and paper money became the rule. The banknotes’ value was ensured by the authority of the government, not by any reserves of actual valuable materials.

To be fair, the notes in circulation had surpassed the coin reserves almost immediately.

Europe would take a looooooooong time to catch up

Were there promissory notes being used during medieval times and afterward? Sure.

But these were more akin to what we think of as bank cheques nowadays than actual banknotes. The Chinese were using banknotes of varying values, printed by the millions, by the middle of the 13th Century. Europe wouldn’t see anything similar until the British started doing it in the late 17th Century, about 400 years later.

Why did they do it?

The Spanish were flooding Europe with gold and silver

Ah, colonialism.

Between the 15th and 16th Centuries, the Spanish (and the Portuguese, we might as well say it), were taking mining for precious metals into overdrive. It is estimated that the silver influx doubled between 1470 and 1520, and increased even more in the 1520s. This increased supply of money made prices skyrocket. There simply were too many people with too much money and not enough stuff to buy.

This made people and governments reevaluate the value of money. People were starting to understand that if the value of gold and silver could fluctuate this much, then perhaps it wasn’t so essential after all.

The modern banknote admits that the value of money is defined by its usage, meaning some form of social and legal consensus.

The British were very wary of completely untethering paper money from gold, however, since that was still seen at the time as some form of guarantor of value. This means we can’t really speak of fiat money yet.

What the Western world was preparing for is something very different: the gold standard.

Chapter 4 — The Fall of the Gold Standard and the Road to Digital Money

Let’s talk about how the gold standard imploded! Fun!

What even is the gold standard?

We’re picking up where we left off in the previous chapter, regarding banknotes. Banknotes are the necessary first step towards a gold bullion standard. Because, yes, there are several kinds.

  • Gold specie standard is the basis for most metal coin economies until the 19th Century. The value of all standard coins (silver, copper, bronze, what have you) would be defined in relation to that of the circulating gold coin.
  • Gold bullion standard is what we mean when we speak of the gold standard. When banknotes replaced gold coins as the preferential currency, governments accepted the responsibility of exchanging them for gold bullion whenever someone desired it. Every banknote was valuable because it represented a certain value in gold.
  • Gold exchange standard is when a government won’t exchange your banknotes for gold but for another nation’s currency (one that does have a gold bullion standard). This way, you have a de facto gold standard.

Gold standards, if we take the term literally, have existed for as long as there were gold coins. They have always been the standard in the regions where they were in circulation.

What we mean by gold standard is gold bullion standard

This is why it’s important to make that distinction. The idea that banks, namely national banks, would ensure that all banknotes in circulation could be exchanged for gold is a lot more recent. And, politically, a lot more significant.

It meant that states (via their national banks) had to accumulate enough gold to make up for all money in circulation. The landmark legislation that created this standard is British, and it was passed by Parliament in 1844. It’s called the Bank Charter Act and what it effectively does is make the Bank of England the only bank capable of issuing paper money, which would replace the gold pound as legal tender. Before this, any bank could issue banknotes. Businesses could take them or not. The legal tender was gold coins.

No more.

There were other (not so famous) standards

There was the silver standard. There were bi-metallic standards, that included both gold and silver coins as legal tender (this was the case for pre-civil war US, by the way).

Most countries in the world, however, had gold exchange standards. This means that the value of their currency wasn’t backed by their own gold reserves, it was backed by (usually) either the US Dollar or the UK Pound Sterling.

Why didn’t this work?

Having a gold standard, and tight control on how much money the government can print, has some virtuous effects. It keeps inflation under control, for one, by keeping the government from fixing problems by throwing money at them. It also provides a measure of certainty to international trade because it puts a stopper to price volatility.

It does, however, have a huge downside.

And that’s deflation.

Deflation is the gold standard killer

What you’re doing with a gold standard, essentially, is limiting the amount of money available.

When the economy is booming (see the Roaring Twenties) this isn’t much of an issue. Money is circulating, most people don’t care about gold, and the government can easily buy it. This means the amount of money in circulation increases in a steady way, the government is increasing its reserves, and everyone is happy.

The problem is when a crisis happens. Such as, say… a war?

Imagine something happens that costs governments a whole lot of money unexpectedly (like a war, say, a big one. A World one. Like in 1915–18). The government will never be able to pay for the war without depleting its reserves, which means abandoning the standard. It’s the only option.

And that’s what Britain, and plenty of other European nations, did.

So what happens if you try to get back to a gold standard and fixed gold prices? Like Churchill did in 1925, in the midst of the great depression?

Well, as the 20s progressed, these European nations were seeing slower growth, because the government had trouble injecting money into the economy. This means they had trouble paying their debts. With low reserves, for there to be more money in circulation, the governments would have to mine more gold.

This is not possible.

So most nations started having trouble paying their debts. Banks started failing. The US economy started seeing the results of this. People, scared, started hoarding gold, which means the government has trouble keeping its reserves up.

This leads to very slow growth because money just isn’t circulating anymore. This means salaries stay stagnant. This means if companies want to continue selling, they need to lower prices. Lower prices mean fewer profits. Fewer profits mean people lose their jobs. Higher unemployment means slower growth.

I think you see where we’re going with this.

There’s a lot of reasons why the Great Depression became the behemoth it did, but the return to the gold standard by governments, namely the UK’s and the US’s, is certainly one of them. When the gold standard was revoked in the 30s, it would never come back.

Welcome to fiat money

Money that is backed by nothing. Its value is purely determined by the market and government assurances. There’s no gold (no grain, either).

Isn’t that wonderful?

Can you imagine what computers could do to that?

Chapter 5: Where We Are Now

This is the very last chapter in our History of Money series, and we are going to be talking about *drum roll*


But not just yet. First, we need to understand how money made its way to the Internet.

The age of plastic

Once the gold standard fell, we could finally speak of true fiat currencies. These are currencies that are tethered to nothing. It’s money that has no intrinsic value and no use value. It is valuable for two reasons:

  • Because the government says so (via legislation).
  • Because trading parties agree.

Once we have reached this point, the transition from paper money to plastic money to electronic money was extremely fast. In terms of money, and its characteristics as a means of exchange, there’s really not much difference between the US Dollars or Euros you’re paying with when you’re using a banknote, a debit card, or an app on your phone.

It’s all the same Dollars or Euros.

The only thing that changes is the material.

We have been adding alternative means of payment

Cheques actually came before banknotes (we’ve looked at those), but since the fall of the gold standard, governments and banks have been all too eager to introduce new, more practical, ways for us to use money. Here’s a quick timeline:

1938 — The Charga-Card comes out, an early predecessor of the credit card.

1958 — Bank of America launched the BankAmericard, the first successful modern credit card.

1967 — The first ATM was set up on a street in Enfield, London.

1997 — The first online banking service was launched by Sumitomo Bank.

2000 — Electronic bill payments are now commonly used.

As we can see, money is evolving right alongside technology. As soon as some new way of processing data and information is available, money starts flowing through it. Since there is no gold standard, and the government has no need to actually ensure that all of this electronic money will ever be converted into physical currency… who cares?

This actually allows governments to pump money into the economy whenever they feel that would be beneficial (granted, they’re not always right).

In fact, a very small percentage of money in circulation right now can be attributed to physical tender. As of 2010, of the $8,853.4 billion of broad money supply in the United States, only $915.7 billion (about 10%) actually physically existed. In any form, be it coins or banknotes.

So what happens when technology overtakes money?

Enter digital currencies

The moment we’ve all been waiting for!

The increased digitalization of money was always going to lead to disruption. There have been attempts to create some form of digital currency or other since the ’80s. The first real attempt, as far as we can tell, was David Chaum’s scientific paper. He called it Blind Signatures for Untraceable Payments.

This was happening at around the same time as the first electronic point-of-payment systems were developed, so you can see this has been going on for quite a while. Way earlier than Satoshi.

Speaking of Satoshi

Satoshi Nakamoto is the best-known name in Bitcoin, despite no one really knowing who they are.

We all know the story, but here’s a quick recap: in August 2008, the domain name bitcoin.org was registered.

In October of the same year, these sentences were first published:

“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”

These are the first lines of one of the most famous whitepapers of all time, Bitcoin: A Peer-to-Peer Electronic Cash System, by Satoshi Nakamoto. What makes Bitcoin revolutionary is not only the technology (more on that later), but the very ideology.

DigiCash, HashCash lay the groundwork

Let us look back for a second. What exactly did Bitcoin do that was so different from its predecessors? Why did it succeed where others failed?

Let’s look at DigiCash.

DigiCash was a company founded by American David Chaum, and its flagship product (of the same name) already had many of the hallmarks of digital currencies today. People liked it for a lot of the same reasons too. It allowed for security (in the form of cryptography). It allowed for privacy (payments were untraceable by the issuing bank, the government, or a third party). It eschewed high fees for small payments, which is one of the major drawbacks of credit cards.

Many considered it to be a truly great product, and technically perfect.

So what happened?

This was the very beginning of ecommerce, the 90s. People still hadn’t figured out how they were going to make it work.

DigiCash had no way of decentralizing its processes. As its user base grew, and a couple of banks actually adopted the tech (Deutsche Bank among them!), the company was unable to survive internal tensions or scale accordingly. It eventually went bankrupt, and credit cards won the war of ecommerce.

So what about HashCash?

HashCash really has nothing to do with money (though people saw the potential early on). It was a proof of work system designed to keep people from sending spam emails. Spam email was a larger problem than we now realize. Whatever service you use today probably has quite effective filters. This wasn’t the case back in 2002.

So Adam Back (some people think he’s Satoshi) devised a proof of work system that would force email senders to perform a “moderately hard, but not intractable function” before sending anything. This wouldn’t be of much concern to people sending normal emails, but it would be a massive demand on spammers, who rely on the ability to send many thousands of emails at a time.

Back’s proposed system would allow for easy and computationally effective verification from the part of the receiver, and the world would be a better place.

The fact is the idea never really took hold, and other forms of filtering through spam won out. But people immediately started speculating about other uses for this specific kind of hash-based proof of work.

Bitcoin, the blockchain, the money of the future

The blockchain is the system that would arise from connecting the dots from all of these previous unsuccessful endeavors. It takes the security measures and concern with privacy of DigiCash, it uses HashCash’s hash-based proof of work principles to ensure the authenticity of every block, and it also mimics a lot of the characteristics of fiat money, namely: portability, scarcity, durability, fungibility, divisibility, and recognisability.

This would change the world.

By evading traditional banking systems AND governments, Bitcoin and other blockchain-based digital currencies have taken money out of the hands of political deciders and made its value rely entirely on adoption and its usage.

With the advent of other blockchain-based technologies in the wake of Bitcoin, the potential for these currencies has exploded. Stablecoins, smart contracts, NFTs. The use cases for this tech are only just beginning to become apparent.

Surely, there are concerns. Volatility and the environmental impact of the energy consumption required to provide proof of work chief among them. Not everyone is immediately ready to embrace a system with no watchdogs and no authorities to prevent wrongdoing.

But adoption is happening.

At Utrust, we are very glad to say we are providing some stepping stones in this process. We are creating a payment system that allows merchants to accept payments with these currencies easily, safely, and seamlessly. Because we understand that these currencies truly are the future of a more transparent and safer world economy.

The future is ours to build

So that’s what’s behind us.

Now, we build.




Building the world’s first cryptocurrency payment solution to offer instant transactions, buyer protection & crypto-to-cash settlements. utrust.com

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