The use of coins as tradable currency dates back to 600 BCE, a time when the Lydians minted the first government-authorized form of what we still use to this day.
The kingdom of Lydia, located in what is now Turkey, was situated on the banks of a river that was rich in gold and silver. King Alyattes is credited with the innovation; using a blend of the two metals to create an alloy called electrum, the coins were minted into small oval discs and then stamped with designs that would make them unique while denoting their value. Smaller coins were made of silver or gold, representing smaller denominations that would add up to the value of a pure silver or pure gold coin.
This served to simplify commerce which, before that time, depended on trading in quantities of gold and silver bars that had to be weighed at every transaction.
The Lydian stater, as this currency was known, became widely recognized across the Mediterranean and, eventually, throughout Europe, enabling trade with foreign cultures and marking a prosperous and progressive time in the history of civilization.
However, as with any brilliant discovery, many counterfeiters attempted to replicate the formula with inferior metals in an effort to line their own pockets. A method was needed to help merchants determine the authenticity of the coinage, and hence, the touchstone was introduced.
A black, slightly abrasive stone that was found naturally in the region gave the Lydians a way to test the levels of gold and silver alloy in a coin. The stone itself was black, non-porous, and harder than the metals under scrutiny. It is durable and does not degrade, even with repeated applications of acidic solutions over many years.
It was discovered that if one rubbed a metal coin on this stone, it made a mark. That mark could then be compared to marks that were known to have gold content, thus revealing the concentration of gold in the coin.
To this day, the touchstone test is used by jewelers and metallurgists to determine the quality and quantity of gold in a metal object. Gold objects are rubbed onto the stone, after which a nitric acid solution is applied to the sample. The acid dissolves impurities and helps the tester to contrast the sample, determining its purity.
This newfound ability to authenticate coins served to deter forgeries of the Lydian stater and other gold coins, creating what is recognized as the first reliable coinage in history. This validation allowed people to build wealth and legacy as the intrinsic value and durability of the money could not be disparaged.
Though this method seems quite primitive when we think about today’s technological advances, the touchstone is still seen as a reliable authority. As currency evolved, new ways of assuring value and authenticity did as well. Ultimately, our economy and our personal wealth depend on it.
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 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.