People have been trading since the beginning of humankind on planet Earth; inventing currencies made this activity easier than before. Throughout the centuries, trading patterns continuously changed. It resulted in establishing money as a means of payment for services or goods. But let’s go back in history in order to explain how it all started. The invention of currencies took a long time.

How it all started

Since ancient times, it was common for each person to specialize in a certain activity or job. This led to the excess of unilateral products owned by a particular inhabitant of a community. Such an inhabitant, however, needed other things, too. A blacksmith who produced various tools did not need hundreds of them at home. Therefore, people started offering an excess of their work for other goods and services which they were not able to procure or create on their own. This is how trade started in human history.

The recorded history of exchange and trade dates back to the period of Mesopotamia around 6000 BC. This type of exchange trade did not include money; the means of payment were goods and services. In this way, everyone determined the value of their own work and products. This evaluation depended on the amount of surplus producers had and the market regulated the prices. This seems to be a fair trade model without any regulations.

People have always been creative and thus, during the period around 5,000 BC, they invented the first currencies as means of payment to simplify trade. This system consisted of metal tokens and their value corresponded to the market price of the corresponding metal. These tokens varied in volume, so users needed to weigh them in order to determine their value. Breaking them in order to make smaller payments was also commonplace. Since this money based its value on a naturally limited resource, its worth was close to stable and predictable.

From chunks of metal to coins

Around 700 BC, coins replaced these metal plates to make the process even simpler. A central authority weighed and minted pieces of metal in order for users to know their value without the need of a scale. After the appearance of coins, counterfeiting started and was almost immediately made illegal. For instance, instead of pure silver metal, an alloy was used to mint coins that looked the same. These were, however, still substantiated means of payment with a minimum risk of devaluation and a relatively stable value. To learn more on how societies moved from these precious metal coins to the use of fiat money, click here.

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