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Home » A short history of money or “Why we’re into crypto payments”!

A short history of money or “Why we’re into crypto payments”!

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Money, perhaps counterintuitively, is one of humanity’s universal ideas. Societies that don’t have any connections and never even had a chance to learn of each other’s existence did invent universal units of exchange, albeit they often looked very different. Naturally, the evolution of money is a very complicated and expansive topic – hundreds of books have been written about it and the scientific debate is still ongoing. So we’ve prepared a very brief overview of the history of money to give you a basic idea of how things progressed.


The most basic form of trade doesn’t involve any money at all – you directly exchange goods for other goods. It is very simple (so simple that it is very easily understood even by toddlers) but limited: both parties should have something that the other party needs. Basically, the entire idea of money was conceived to solve this issue.

A transitional form between barter and “true” money is commodity money – the use of certain goods as units of currency. It can be grain, cattle, pelts, or whatever else. Coins, made from precious metals, are often considered commodity money as well, but it is somewhat debatable. 


The next step after commodity money was representative money made from things that don’t have inherent value but merely serve as a representation of value. While many different items, including boar husks (still in limited use in Vanuatu, by the way), clay tokens, and so on, were used as representative money, metallic coins, mostly from precious metals (gold, silver, and copper) became the world standard for many centuries.

Metallic coins offer a lot of advantages: they are durable, mostly inert (so the mass of the coins doesn’t change over time), and relatively easy to handle. Moreover, back then gold and silver didn’t have practical utility beyond showing off wealth, so these metals were a perfect option. Currency conversions, by the way, were also rather simple – the value of coins depended on the metal in them, so all you needed was a scale.

Paper money

Despite their advantages, coins were cumbersome and heavy (especially when it came to really large transactions) and, more importantly, there wasn’t enough gold and silver in circulation to cover the expenses of governments, kings, and nobles. Paper money, first invented in China around 700 BC and widely used in Europe since the 17th century, solved this problem.

A banknote was just a piece of paper with a promise of the government or bank to pay its holder the appropriate sum in gold or silver. That’s what gave paper money their value. Theoretically, every issued banknote was supposed to be backed but precious metals, but in practice, this rule was never followed – governments always printed more paper money than they could conceivably back up. So in practice, the value of paper money was much lower than the supposedly equivalent golden coins. 

By the mid-20th century, the system of paper money was a mess. The Bretton-Woods Agreement of 1944 was an attempt to fix it: the US Dollar was pegged to gold (at 35 USD per troy ounce), and over 50 other national currencies were pegged to the US Dollar. However, this system didn’t last long and in 1944 the world switched to fiat money.

Fiat money

In 1971 US unilaterally terminated the convertibility of the US Dollar to gold. At first, this termination was “temporary”, but in 1976 it was formalized in the Jamaica Accords. Since then the world has used almost exclusively fiat money. Well, fiat money was used prior to this date as well, but in 1971 fiat became the dominant type of money in the world.

Fiat money is backed by nothing but the belief of the people in its value. On the one hand, it is convenient – monetary mass isn’t limited by any specific commodity. On the other hand, economic troubles or mistakes in monetary policy can easily lead to the devaluation of fiat money.

Cashless society

For a long period of time, fiat money in day-to-day life was mostly represented by cash – physical banknotes and coins. Cashless transactions were the prerogative of institutions or really rich individuals. However, in the 1990s, with the advent and proliferation of the Internet, card payments, and electronic payment services the trend towards a cashless society emerged. And it doesn’t show any signs of dying out – the share of cashless payments steadily grows across the world. Especially since the COVID-19 pandemic.

Graph represents number of cashless transactions worldwide, 2013-2027

Curiously, in the last decades, it is the developing countries that have contributed the most to the growth of cashless payments and transactions. This is due to the proliferation of the Internet and, especially, mobile internet in the developing world. The number of e-money users grows there much faster than in Europe or North America.


Fiat money has its fair share of issues. The main problem is that governments can print as much money as they want, so your savings can be devalued overnight. And even in the most developed economies the depreciation of money still takes place.

Cryptocurrencies, starting with Bitcoin, developed by Satoshi Nakamoto, are designed to address this issue. Bitcoin and most other early cryptocurrencies are issued through computer networks, do not rely on any centralized authority, and are not subject to inflation, since their maximum volume is fixed. Well, at least this was the basic idea – centralized and inflationary cryptos have been developed since, as well as stablecoins, pegged to fiat currencies. 

At first, cryptocurrencies were mostly perceived as “geek toys”, but the crypto market exploded in the last decade. Currently, the global cryptocurrency market capitalization is about 1,5 trillion dollars. And, more importantly, the use of crypto payments is growing rapidly.

Graph represents crypto payment value worldwide, 2020-2025

Aside from individual investors and institutions who are attracted by high returns and accessibility of financial instruments, global businesses are also rapidly adopting crypto – there are more than 18000 businesses worldwide accepting crypto as means of payment, including major corporations like Tesla, Microsoft, Starbucks, etc. Crypto can help online e-commerce retailers with:

  • global customer reach
  • reduced fraud
  • save on processing fees

Also, according to market research, average check for online purchases paid in crypto is up to x2.6 higher than fiat. So, it’s not a surprise why only five years ago the ability to purchase coffee with crypto was a novelty, available only in a few places around the world, but today, 75% of US retailers either already accept crypto, or plan to introduce crypto payments within a couple of years. 

It’s all heading towards cryptocurrencies replacing fiat and becoming the future of money. It will take years or, more likely, decades for crypto to replace fiat (after all, it took paper money centuries to replace coinage), but it is inevitable.

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