Modex Electronic Cash: The History of Money
1995 Jul 1
See all posts
Modex Electronic Cash: The History of Money @ Satoshi Nakamoto
- Author
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Modex Electronic Cash
- Email
-
satoshinakamotonetwork@proton.me
- Site
-
https://satoshinakamoto.network
The History of Money
Over more than 4,000 years money has evolved from primitive tokens to
sophisticated, digital systems.
The loose change in your pocket is just one chapter in that
story.
Follow the Timeline to look further into the way that money, and
banking, have evolved, and then journey into the electronic future.
Then test your knowledge in our on-line quiz.
Before Money
It's hard to think of a world without money. How did people buy, sell
or exchange goods like food and clothing. The earliest human societies
did not need money. Instead, goods were bartered or swapped.
In other words, if you grew some corn, but wanted a new shear, you
could exchange some of your corn for a new shear from the
blacksmith.
You would have to haggle over the value of the shear to you, as would
the blacksmith.
Bartering is primitive, but it only works if both parties want the
goods on offer for exchange. What if the blacksmith didn't want your
corn, but your cow? Could you afford to lose the animal? What if you
needed the shear now but couldn't part with the corn or the cow until
the next summer?
As societies developed and became more complex, a way around these
problems was needed.
Shells to Coins
The oldest written records of money are from Ancient Mesopotamia (now
in southern Iraq) about 4,500 years ago. About 3,500 years ago tiny
Cowrie shells from the Indian Ocean were used in China as a means of
exchange. Even the Chinese symbols for buying, bartering and selling
incorporate the symbol for the Cowrie shell. The shells were still being
used as currency in parts of Africa as late as the 19th Century. Ancient
Mesopotamian inscriptions describe payments being made with weighed
amounts of silver. Since then, weighed amounts of metal have been used
as money in many parts of the world, and this practice led to the
invention of coins.
Coins are just pieces of metal marked with a special design that
indicates its use as money. Unlike precious metals, however, coins do
not need to have any value in themselves. They only represent value.
True coinage developed in Asia Minor during the 7th century BC in
what is now Turkey. Weighed lumps of ‘electrum' (a mixture of gold and
silver) were used by the Lydians as money, and were stamped with
pictures, a practice known as minting, as a guarantee of their purity.
These irregular lumps were eventually standardized in shape and
weight.
The same idea was developed elsewhere to standardize other forms of
metal money: copper lumps in southern USSR and Italy, bronze tools and
shells in China, silver rings in Thailand, and gold and silver bars in
Japan.
As soon as coins were commonplace, however, people realised their
limitations - chiefly their weight and bulk, and a new type of money was
needed which made larger transactions easier.
Banks and Banknotes
During the 10th century, the Chinese started to leave their heavy
iron coins with merchants and to use hand written receipts instead. The
government, who issued the coins, adopted this idea in the early 11th
century, when receipts were printed which were given fixed values.
This practice evolved and spread, with gold and silver being
deposited in exchange for receipts (often with Goldsmiths), as well as
coins.
The goldsmiths profited from the gold and silver deposits by lending
them out to third parties and charging interset. Eventually banks
emerged which assured the value of their notes and people no longer
exchanged them for the original deposit. The notes had become
currency.
The first official printed notes were issued in 1661 - by the Swedish
Stockholm Bank.
The exchanges of notes for coins and precious metal took place on
benches, hence the term "Bank", from "banco" - the Italian for
bench.
Forgery, and the frequency of issuers going out of business, led to
governments often taking over the issue of notes and coins, storing the
gold or silver reserves to back them up in places such as the Tower of
London, in England.
Even banknotes had their limits. Although you may have money in the
bank, to get to it requires you having banknotes to hand. This is
expensive (money has to be printed and circulated), as well as risky
(the money could be stolen or forged). Banks sought a way of exchanging
their customers money without the medium of notes.
Cheques and Plastic
Cheques, printed by Banks, allowed their customers to write
"exchange" notes to their other customers, or customers of other banks.
Money could then change hands without involving any notes or coins.
Over the past twenty years, with the advent of computers, the
majority of money has come to be stored as bits and bytes in Bank
computers, and exchanged digitally - through telephone or satellite
links - rather than physically.
Today, the majority of the world's cash does not exist in notes and
coins at all.
Plastic cards holding personal data on magnetic strips were developed
to give people access to their money stored electronically. Cheque,
debit and credit cards now enable nearly every kind of payment, through
the users' bank account.
As with every other stage in the evolution of money, however, even
these cards have their limitations. For example, the cost of using them
means that coins and notes are still the most suitable means of making
small payments. Magnetic Stripe card transactions also have to be signed
and authorised, slowing down the transaction process when compared to
cash.
Money is now evolving to the next stage - the creation of electronic
cash, such as Mondex, as an alternative to notes and coins.
Electronic Cash
Despite the popularity of credit and debit cards, the vast majority
of all transactions worldwide are still carried out with cash.
Cash remains the only universally acceptable form of payment - even
when a retailer doesn't accept a particular credit card, cash will be
taken. When it is, the exchange of value is immediate. No clearing or
processing is needed, no signatures and no electronic transfers.
Smart cards have been used as cash substitutes for a decade, in phone
cards, vending cards and transit cards. However, the value stored on
these cards has already been paid, and cannot usually be exchanged for
other goods and services.
A true cash alternative, replicating the core features of notes and
coins, would have to be universally recognised and acceptable. Like
cash, transactions would have to offer immediate transfers of value.
Finally, like hard cash, electronic cash has to enable easy person to
person payments. Electronic cash also has to be able to work in
different currencies. And it would have to be secure from forgery.
Mondex is the only electronic cash system which meets all of these
criteria.
Modex Electronic Cash: The History of Money
1995 Jul 1 See all postsModex Electronic Cash
satoshinakamotonetwork@proton.me
https://satoshinakamoto.network
The History of Money
Over more than 4,000 years money has evolved from primitive tokens to sophisticated, digital systems.
The loose change in your pocket is just one chapter in that story.
Follow the Timeline to look further into the way that money, and banking, have evolved, and then journey into the electronic future.
Then test your knowledge in our on-line quiz.
Before Money
It's hard to think of a world without money. How did people buy, sell or exchange goods like food and clothing. The earliest human societies did not need money. Instead, goods were bartered or swapped.
In other words, if you grew some corn, but wanted a new shear, you could exchange some of your corn for a new shear from the blacksmith.
You would have to haggle over the value of the shear to you, as would the blacksmith.
Bartering is primitive, but it only works if both parties want the goods on offer for exchange. What if the blacksmith didn't want your corn, but your cow? Could you afford to lose the animal? What if you needed the shear now but couldn't part with the corn or the cow until the next summer?
As societies developed and became more complex, a way around these problems was needed.
Shells to Coins
The oldest written records of money are from Ancient Mesopotamia (now in southern Iraq) about 4,500 years ago. About 3,500 years ago tiny Cowrie shells from the Indian Ocean were used in China as a means of exchange. Even the Chinese symbols for buying, bartering and selling incorporate the symbol for the Cowrie shell. The shells were still being used as currency in parts of Africa as late as the 19th Century. Ancient Mesopotamian inscriptions describe payments being made with weighed amounts of silver. Since then, weighed amounts of metal have been used as money in many parts of the world, and this practice led to the invention of coins.
Coins are just pieces of metal marked with a special design that indicates its use as money. Unlike precious metals, however, coins do not need to have any value in themselves. They only represent value.
True coinage developed in Asia Minor during the 7th century BC in what is now Turkey. Weighed lumps of ‘electrum' (a mixture of gold and silver) were used by the Lydians as money, and were stamped with pictures, a practice known as minting, as a guarantee of their purity. These irregular lumps were eventually standardized in shape and weight.
The same idea was developed elsewhere to standardize other forms of metal money: copper lumps in southern USSR and Italy, bronze tools and shells in China, silver rings in Thailand, and gold and silver bars in Japan.
As soon as coins were commonplace, however, people realised their limitations - chiefly their weight and bulk, and a new type of money was needed which made larger transactions easier.
Banks and Banknotes
During the 10th century, the Chinese started to leave their heavy iron coins with merchants and to use hand written receipts instead. The government, who issued the coins, adopted this idea in the early 11th century, when receipts were printed which were given fixed values.
This practice evolved and spread, with gold and silver being deposited in exchange for receipts (often with Goldsmiths), as well as coins.
The goldsmiths profited from the gold and silver deposits by lending them out to third parties and charging interset. Eventually banks emerged which assured the value of their notes and people no longer exchanged them for the original deposit. The notes had become currency.
The first official printed notes were issued in 1661 - by the Swedish Stockholm Bank.
The exchanges of notes for coins and precious metal took place on benches, hence the term "Bank", from "banco" - the Italian for bench.
Forgery, and the frequency of issuers going out of business, led to governments often taking over the issue of notes and coins, storing the gold or silver reserves to back them up in places such as the Tower of London, in England.
Even banknotes had their limits. Although you may have money in the bank, to get to it requires you having banknotes to hand. This is expensive (money has to be printed and circulated), as well as risky (the money could be stolen or forged). Banks sought a way of exchanging their customers money without the medium of notes.
Cheques and Plastic
Cheques, printed by Banks, allowed their customers to write "exchange" notes to their other customers, or customers of other banks. Money could then change hands without involving any notes or coins.
Over the past twenty years, with the advent of computers, the majority of money has come to be stored as bits and bytes in Bank computers, and exchanged digitally - through telephone or satellite links - rather than physically.
Today, the majority of the world's cash does not exist in notes and coins at all.
Plastic cards holding personal data on magnetic strips were developed to give people access to their money stored electronically. Cheque, debit and credit cards now enable nearly every kind of payment, through the users' bank account.
As with every other stage in the evolution of money, however, even these cards have their limitations. For example, the cost of using them means that coins and notes are still the most suitable means of making small payments. Magnetic Stripe card transactions also have to be signed and authorised, slowing down the transaction process when compared to cash.
Money is now evolving to the next stage - the creation of electronic cash, such as Mondex, as an alternative to notes and coins.
Electronic Cash
Despite the popularity of credit and debit cards, the vast majority of all transactions worldwide are still carried out with cash.
Cash remains the only universally acceptable form of payment - even when a retailer doesn't accept a particular credit card, cash will be taken. When it is, the exchange of value is immediate. No clearing or processing is needed, no signatures and no electronic transfers.
Smart cards have been used as cash substitutes for a decade, in phone cards, vending cards and transit cards. However, the value stored on these cards has already been paid, and cannot usually be exchanged for other goods and services.
A true cash alternative, replicating the core features of notes and coins, would have to be universally recognised and acceptable. Like cash, transactions would have to offer immediate transfers of value. Finally, like hard cash, electronic cash has to enable easy person to person payments. Electronic cash also has to be able to work in different currencies. And it would have to be secure from forgery.
Mondex is the only electronic cash system which meets all of these criteria.