Evolution of Money: Why You Should Care About Crypto
6 mins read
3 mths ago
Did you know that “Salt” was once used as a currency by Romans? Even the word “salary” is derived from “sal,” which means “salt” in Latin. While this fun fact may shock many, it offers a clearer perspective of how money has evolved over the years. Today, what we consider money, that is, shillings, dollars, naira, and pounds, has been redefined over the years and, to date, is taking new forms.
People have gone from using coins and paper notes issued by the government to using cheques, credit cards, mobile banking and more. With innovations and technology comes new payment methods that we accept to ease the process of transactions.
Money often modifies to meet our needs. With the recent growth in technology, a new form of money has evolved, cryptocurrencies. While cryptocurrencies are relatively a new subject for some, they have existed for over a decade. In this article, we’ll review the evolution of money to explain better cryptocurrencies and how they can help make your transactions easier, cheaper and faster.
Evolution of Money: From Commodity Money To E-Money
The word money is defined differently worldwide but generally considered as anything accepted in payment for goods or services and settling debts. It has evolved through different stages according to time, place and circumstances. Some of the significant steps through which money has developed are as follows:
Before money, there was no money, so people engaged in what is known as trade by barter which is the exchange of goods directly for goods or services. A person needing a construction worker for a building might exchange the wheat they had harvested from the farm. However, goods are not durable, making this payment method unsustainable.
- Commodity Money
Every day objects like salt and cattle became practical forms of money. However, this created a new challenge as there was difficulty in splitting these commodities into smaller amounts or units.
- Precious stones
Societies began to use precious stones like gold, silver and metal to pay for items. Apart from the fact that these items were heavy and not easily portable, not all countries had the resources for these precious stones.
- Metallic money
Societies evolved to using coins as payment for goods and services. However, the coins were still heavy and harder to transport for large purchases. The coins still had gold, silver and metal traces, making them valuable. However, people began to create coins with no precious metals because commodities were scarce. There arose worthless coins necessitating money is unforgeable.
- Paper (Fiat)Money
The system evolved into the paper currency issued by the government’s decree. Today, we use this paper money to complete transactions; though these coins still exist like the Kenyan shillings, people hardly use them.
- Credit Money
After the creation of paper money and the spread of banking institutions, cheques were created to transfer money to the other party safely. They are a form of IOU payable on demand. However, cheques are time-consuming to trade for paper money. They require numerous processes leading to the creation of E-money.
New advancements in the payment system, such as the creation of the electronic money transfer system(EFTS), were made thanks to the development of the computer and modern telecommunication technology. People can now send and receive money through a mobile device or debit card reader. Debit and credit cards, mobile banking apps and payment methods like Momo were created in Kenya.
Cryptocurrencies were introduced over a decade ago to bridge the gap in existing financial payment systems. However, unlike traditional currencies, cryptocurrencies are not issued by the government and cannot be touched physically. Instead, they are managed via a crypto wallet. Examples of cryptocurrencies include Bitcoin, Ethereum, tether, and Solana.
Cryptocurrencies: The present and the future
Modern technology lets people use credit cards, electronic banking, and mobile banking to facilitate global transactions. Digital technology has also evolved to allow for the creation of new currencies like bitcoin and other cryptocurrencies.
These digital currencies demonstrate the enduring qualities of money that are; difficult to counterfeit, portable, divisible, limited in supply, and allow transactions to be completed within a fraction of a second. Digital currencies have begun to challenge the power of traditional currencies as people prefer to save in cryptocurrencies.
As people become more aware of cryptocurrencies, they are fast adopting them in their saving, investment and retirement plans. Cryptocurrency adoption in Africa grew 1200% between July 2020 and June 2021, making it the fastest adoption rate in the world. Businesses in Kenya and globally have also begun accepting crypto in payment.
Why You Should Choose Crypto
Cryptocurrencies' popularity as an investment and savings option has grown as people consider them a store of value that helps Kenya circumvent the constraints of the traditional financial system. Here are some reasons why cryptocurrencies are preferred to local currencies:
The existing financial payment methods have proved inaccessible to all, with about 17% of the Kenyan population being entirely excluded from financial services. With cryptocurrencies, this is resolved. There is no need for rigorous documentation or queuing at banking institutions for banking services.
With cryptocurrencies, you can open an account in minutes and complete transactions on the go from anywhere in the world.
- Fast and cheap transactions
The transaction fees we pay when conducting local transactions may seem insignificant but cumulated together sums up to a large sum. It becomes even more exorbitant when we want to complete cross-border transactions. Apart from being expensive, international transactions can take hours and days to complete and can be very stressful.
However, with cryptocurrencies, you can complete cross-border transactions at the lowest possible cost and at lightning speed with a tap on your mobile device.
- High Return Potential
Cryptocurrencies have become very popular because of their price fluctuations, allowing many to be millionaires and even billionaires. Bitcoin’s price soared from an initial selling price of $0.0008 to an all-time high of $68,789 in 2021.
- A hedge against inflation
Inflation reduces the purchasing power, making it discouraging to save in local currencies. With cryptocurrencies, you can confidently save in your funds, as the limited supply of cryptocurrencies makes them immune to inflation. Also, saving your funds in crypto allows you to earn from price fluctuations.
With cutting-edge technology, cryptocurrencies are designed to prevent forgery and cases of phoney transfers that have been used to scam people. Also, with its security mechanisms, your crypto wallet is secure, and no one can access it to steal your funds. However, you must keep your wallet key secret as access to it grants others access to your account.
However, it is essential to note that cryptocurrencies, like any investment or saving option, aren't without some risks. Cryptocurrencies are very volatile, and their prices can fluctuate. While the price of a cryptocurrency can spike to dizzying highs, it can also crash to lows just as quickly. As long-term investments, these price volatility effects are minimised.
At the same, cryptocurrencies are not issued by the government, but their legitimacy is derived from the people using them. However, countries are beginning to adopt bitcoin, with El Salvador accepting bitcoin as a legal tender.
Money has evolved over the years to meet the needs of people. Cryptocurrencies stemmed from a need to provide financial inclusion for the people and bridge the gap in the traditional financial system. Cryptocurrencies play an essential role today because of their numerous advantages, such as speedier and cheaper transactions, hedging against inflation, diminishing the delays of banking institutions and serving as an investment option.
Cryptocurrencies are still gaining adoption across the globe, and government institutions are making findings on how to integrate them into the existing financial system. You can join the crypto revolution by buying bitcoin and enjoying the numerous benefits it has.
Financial powerhouses like Yellow Card, recognising the potential of bitcoin, have placed themselves strategically across Africa to help with crypto adoption. With Yellow Card, you can easily buy and sell crypto in Kenya and other countries at the best rates while being assured of cryptocurrencies. You can also learn more about Yellow Card via the extensive guides Yellow Card academy provides.
Don’t get left behind in the crypto money evolution; learn more and get started with crypto today!
Disclaimer: This article is meant to provide general guidance and understanding of cryptocurrency and the Blockchain network. It’s not an exhaustive list and should not be taken as financial advice. Yellow Card Academy is not responsible for your investment decisions.