Money has evolved considerably since the dawn of trade. Before the invention of money, people traded goods back and forth, often without a great deal of thought to an equivalent value. If a person had too much of something, they would simply trade it for an item they needed.
The trouble with the barter system was that there was no standardization and no real measure of value. Trading in commodities became a way to assign a higher value to items, and certain commodities developed greater value because they were more useful.
In this sense, cattle, salt, sugar, wood, tobacco, and textiles were considered valuable commodities, though many of these items were impractical as they could not be divided or might go bad. While the barter system worked for hundreds of years, it was impractical as most commodities couldn’t be easily transported.
Cowrie shells simplified trade and commerce, as they were easy to carry and allowed currency to be standardized to some extent. But, with no real value and no centralized authority, cowrie shells didn’t enjoy a lengthy reign.
By 1100BC, bronze castings started to be used in China, which was soon replaced by gold sheets of varying sizes to represent different values. Gold and other precious metals were often used as currency, either in the form of ingots or objects like rings that could be exchanged for goods and services. Because of the need to weigh and verify each item for authenticity, this type of currency didn’t gain widespread traction. Additionally, they were not accepted in all markets, so their value was limited.
The first known hard currency appeared in 600BC in Lydia, now part of Turkey. Invented by King Alyattes of Lydia, the first coin was made of electrum metal and featured an image of a roaring lion.
The Lydian Stater differed significantly from previous forms of currency in that since the government issued it, it was trusted by foreign traders throughout Europe. From that time forward, trade advanced quickly, connecting the East and the West in commercial enterprise.
Perhaps the most critical characteristic of the Stater was that it was legal tender with an assigned value. Because there were a finite number of coins, their value grew as did the demand for them. Additionally, it was accepted as a currency outside of the region, imbuing its holder with enduring wealth and buying power.
As revolutionary as the Stater was, it was still cumbersome to carry a large quantity of them as the metal was heavy and needed to be weighed and counted to define value. Counterfeiters made quick work of knocking off the coins and passing them off as real.
While paper money didn’t make its way into our pockets until the 18th century, early European merchants often used certificates that assigned a certain quantity of money to a transaction while the silver, gold, or other coinage remained in a vault.
Just as money helped to broaden our horizons in ancient times, it continues to be a force for progress today.
About: Mr. Rory Brown is a Managing Partner and Co-Founder of Nicklaus Brown & Co. Rory Brown is also the co-founder of Lydian, which gained him recognition by Ernst & Young as Financial Services Entrepreneur of the Year, and was a member of the INC 500 for multiple times. He is currently most passionate about delving into the history of money and how our modern currency has evolved into what it is today. In his spare time, he can be found pouring over the history of the Lydians - the first people to have used gold and silver coinage.