Poor people need it, rich people keep it, and only few can resist it.
It can make us happy, but not always.
Intrinsically it has zero value, but then it’s maybe the only thing in this world
we all agree to trust.
To see how money came about, it helps to understand its history.
First, there was barter, a system in which people simply exchanged what they wanted with
what they had.
This simple trade of goods led to an immense increase in specialization, economic growth
and wealth.
To find each other and exchange what they had for what they needed, people formed markets.
To ensure that their produce can be trusted, they later invented brands.
But there was a problem.
Barter is based on a "double coincidence of wants", which means that people who wanted
each other's stuff, also had to find another.
In a world without forms of telecommunications this wasn’t easy.
And as a result they often had to go an extra mile to find their luck.
Around 3,500 years ago someone came up with the idea to weigh products in the form of
rare metals and gold and silver became a medium of exchange.
This was possible because there was a shared belief that gold was as beautiful as it was
scarce.
Gold allowed us to replace barter, and make and sell things, and then save the income
of our earning.
The ability to store value was born.
This meant we were able to take the earnings of our work into the future, which led to
an immense increase in innovation and specialization.
Trade exploded and as a result, a lot of wealth was created.
Around 1,000 years ago, some smart businessmen realized that trust itself was as good as
gold.
In exchange for goods, they simply promised the seller to give them the gold later and
handed them a letter of credit instead..
Paper notes had the advantage that they were lighter than gold, and easier to count, store
and protect.
Rulers and politicians then soon realized that they can issue these notes themselves
and started prohibiting others to do so.
To win the trust of their people, they promised to pay back every note with an equivalent
amount of gold.
Around 100 years ago rulers began craving for more money than they had, and so they
stopped backing it with gold, and just began printing as many notes as they needed — the
so-called fiat money was born.
The newly printed money was often given to business owners in the form of cheap loans.
This allowed them to invest, hire, and increase economic activity.
Employees who earned and saved that money realized that while prices of everyday goods
went up over time, the buying power of their savings went down.
As a result they often spend their savings fast— further increasing economic activity.
But soon some began to understand that while their incomes remained relatively flat, housing
and company stocks kept rising and rising
Inflation of asset prices happened because while there was more and more money, there
was still just the same limited amount of land to buy.
Some started to argue that whenever governments print new money, they effectively reduce the
savings of the poor and increase the prices of homes, usually owned by the rich.
This is one reason people began searching for a new form of money.
Cryptocurrencies, like Bitcoin, are the latest form of money.
They work just like the others because people can place trust in them.
Unlike fiat money, bitcoins are created by a decentralized network of mathematical code.
That means that they can be transferred directly from person to person without the involvement
of middlemen and no-one can increase the fixed amount of 21 million bitcoins there are - which
is the main reason people trust and save them.
What do you think?
Will history end here and bitcoin become and remain the last form of money?
And if bitcoins disappear again, which form of money can we all agree to trust going forward?
Before you make your argument, you may want to know that so-called honest or good money
usually has five characteristics:
Scarcity Durability
Portability Divisibility
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