The history of money concerns the development of means of carrying out transactions involving a

medium of exchange. Money is any clearly identifiable object of value that is generally accepted
as payment for goods and services and repayment of debts within a market or which is legal
tender within a country. OR

Money is any item or verifiable record that is generally accepted as payment for goods and
services and repayment of debts in a particular country or socio-economic context,[1][2][3] or is easily
converted to such a form.[citation needed] The main functions of money are distinguished as: a medium of
exchange; a unit of account; a store of value; and, sometimes, a standard of deferred
payment.[4][5] Any item or verifiable record that fulfills these functions can be considered as money.

BARTER

Barter is a system of exchange where goods or services are directly exchanged for other goods or
services without using a medium of exchange, such as money.[1] It is distinguishable from gift
economies in many ways; one of them is that the reciprocal exchange is immediate and not delayed
in time. It is usually bilateral, but may be multilateral (i.e., mediated through a trade exchange) and,
in most developed countries, usually only exists parallel to monetary systems to a very limited
extent. Barter, as a replacement for money as the method of exchange, is used in times of monetary
crisis, such as when the currency may be either unstable (e.g., hyperinflation or deflationary spiral)
or simply unavailable for conducting commerce.

The earliest means of storage are thought to be money-boxes (θησαυροί[30]) made similar to the
construction of a bee-hive,[31][32] as of the Mycenae tombs of 1550–1500 BCE.[33][34][35]
Cattle were used as an early form of currency from 9,000 BCE onward (Davies 1996 &
1999).[36][37] Both the animal and the manure produced were valuable; animals are recorded as being
used as payment as in Roman law where fines were paid in oxen and sheep (Rollin 1836)[38][39][40] and
within the Iliad and Odyssey, attesting to a value c. 850–800 BCE (Evans & Schmalensee 2005).
ADVANTAGES OF BARTER

Since direct barter does not require payment in money, it can be utilized when money is in short
supply, when there is little information about the credit worthiness of trade partners, or when there is
a lack of trust between those trading.
Barter is an option to those who cannot afford to store their small supply of wealth in money,
especially in hyperinflation situations where money devalues quickly.
DISADVANTAGES

The limitations of barter are often explained in terms of its inefficiencies in facilitating exchange in
comparison to money.
It is said that barter is 'inefficient' because:
There needs to be a 'double coincidence of wants'
For barter to occur between two parties, both parties need to have what the other wants.
There is no common measure of value
In a monetary economy, money plays the role of a measure of value of all goods, so their
values can be assessed against each other; this role may be absent in a barter economy.
Indivisibility of certain goods
 If a person wants to buy a certain amount of another's goods, but only has for payment one
indivisible unit of another good which is worth more than what the person wants to obtain, a
barter transaction cannot occur.
Lack of standards for deferred payments
This is related to the absence of a common measure of value, although if the debt is
denominated in units of the good that will eventually be used in payment, it is not a problem.
Difficulty in storing wealth
If a society relies exclusively on perishable goods, storing wealth for the future may be
impractical. However, some barter economies rely on durable goods like pigs or cattle for
this purpose.

HISTORY

SILENT TRADE

Other anthropologists have questioned whether barter is typically between "total" strangers, a form
of barter known as "silent trade". Silent trade, also called silent barter, dumb barter ("dumb" here
used in its old meaning of "mute"), or depot trade, is a method by which traders who cannot speak
each other's language can trade without talking. However, Benjamin Orlove has shown that while
barter occurs through "silent trade" (between strangers), it also occurs in commercial markets as
well. "Because barter is a difficult way of conducting trade, it will occur only where there are strong
institutional constraints on the use of money or where the barter symbolically denotes a special
social relationship and is used in well-defined conditions. To sum up, multipurpose money in markets
is like lubrication for machines - necessary for the most efficient function, but not necessary for the
existence of the market itself.

TIMES OF MONETARY CRISIS

As Orlove noted, barter may occur in commercial economies, usually during periods of monetary
crisis. During such a crisis, currency may be in short supply, or highly devalued through
hyperinflation. In such cases, money ceases to be the universal medium of exchange or standard of
value. Money may be in such short supply that it becomes an item of barter itself rather than the
means of exchange. Barter may also occur when people cannot afford to keep money (as when
hyperinflation quickly devalues it).

EXCHANGES

Economic historian Karl Polanyi has argued that where barter is widespread, and cash supplies
limited, barter is aided by the use of credit, brokerage, and money as a unit of account (i.e. used to
price items). All of these strategies are found in ancient economies including Ptolemaic Egypt. They
are also the basis for more recent barter exchange systems.[15]
While one-to-one bartering is practiced between individuals and businesses on an informal basis,
organized barter exchanges have developed to conduct third party bartering which helps overcome
some of the limitations of barter.
TWENTIETH CENTURY EXPERIMENTS

The first exchange system was the Swiss WIR Bank. It was founded in 1934 as a result of currency
shortages after the stock market crash of 1929. "WIR" is both an abbreviation of Wirtschaftsring and
the word for "we" in German, reminding participants that the economic circle is also a
community.[citation needed]
In Spain (particularly the Catalonia region) there is a growing number of exchange markets.[20] These
barter markets or swap meets work without money. Participants bring things they do not need and
exchange them for the unwanted goods of another participant. Swapping among three parties often
helps satisfy tastes when trying to get around the rule that money is not allowed.[21]
Michael Linton originated the term "local exchange trading system" (LETS) in 1983 and for a time
ran the Comox Valley LETSystems in Courtenay, British Columbia.[22] LETS networks use interest-
free local credit so direct swaps do not need to be made. For instance, a member may earn credit by
doing childcare for one person and spend it later on carpentry with another person in the same
network. In LETS, unlike other local currencies, no scrip is issued, but rather transactions are
recorded in a central location open to all members. As credit is issued by the network members, for
the benefit of the members themselves, LETS are considered mutual credit systems.
MODERN DEVELOPMENTS

According to the International Reciprocal Trade Association, the industry trade body, more than
450,000 businesses transacted $10 billion globally in 2008 – and officials expect trade volume to
grow by 15% in 2009.[23]
It is estimated that over 450,000 businesses in the United States were involved in barter exchange
activities in 2010. There are approximately 400 commercial and corporate barter companies serving
all parts of the world. There are many opportunities for entrepreneurs to start a barter exchange.
Several major cities in the U.S. and Canada do not currently have a local barter exchange. There
are two industry groups in the United States, the National Association of Trade Exchanges (NATE)
and the International Reciprocal Trade Association (IRTA). Both offer training and promote high
ethical standards among their members. Moreover, each has created its own currency through
which its member barter companies can trade. NATE's currency is the known as the BANC and
IRTA's currency is called Universal Currency (UC).[24]
In Canada, the largest barter exchange is Tradebank, founded in 1987.
In the United States, the largest barter exchange and corporate trade group is International
Monetary Systems, founded in 1985, now with representation in various countries.
In Australia and New Zealand the largest barter exchange is Bartercard, founded in 1991, with
offices in the United Kingdom, United States, Cyprus, UAE and Thailand.[25]
Corporate barter focuses on larger transactions, which is different from a traditional, retail oriented
barter exchange. Corporate barter exchanges typically use media and advertising as leverage for
their larger transactions. It entails the use of a currency unit called a "trade-credit". The trade-credit
must not only be known and guaranteed, but also be valued in an amount the media and advertising
could have been purchased for had the "client" bought it themselves (contract to eliminate ambiguity
and risk).[citation needed]
Soviet bilateral trade is occasionally called "barter trade", because although the purchases were
denominated in U.S. dollars, the transactions were credited to an international clearing account,
avoiding the use of hard cash.
ELECTRONIC MONEY

Digital currency or digital money or electronic money is distinct from physical (such
as banknotes and coins). It exhibits properties similar to physical currencies, but allows for
instantaneous transactions and borderless transfer-of-ownershipLike traditional money, these
currencies may be used to buy physical goods and services, but may also be restricted to certain
communities such as for use inside an on-line game or social network. Digital currency is a money
balance recorded electronically on a stored-value card or other device. Another form of electronic
money is network money, allowing the transfer of value on computer networks, particularly
the Internet. Electronic money is also a claim on a private bank or other financial institution such
as bank deposits.

HISTORY

In 1983, a research paper by David Chaum introduced the idea of digital cash.[4] In 1990, he
founded DigiCash, an electronic cash company, in Amsterdam to commercialize the ideas in his
research.[5] It filed for bankruptcy in 1998.[6][7] In 1999, Chaum left the company.
In 1997, Coca-Cola offered buying from vending machines using mobile payments.[8] After
that PayPal emerged in 1998.[9] Other system such as e-gold followed suit, but faced issues because
it was used by criminals and was raided by US Feds in 2005.[5] In 2008, bitcoin was introduced,
which marked the start of Digital currencies.
DIGITAL AND VIRTUAL CURRENCY

According to the European Central Bank's "Virtual currency schemes – a further analysis" report of
February 2015, virtual currency is a digital representation of value, not issued by a central bank,
credit institution or e-money institution, which, in some circumstances, can be used as an alternative
to money. In the previous report of October 2012, the virtual currency was defined as a type of
unregulated, digital money, which is issued and usually controlled by its developers, and used and
accepted among the members of a specific virtual community.
According to the Bank For International Settlements' "Digital currencies" report of November 2015,
digital currency is an asset represented in digital form and having some monetary characteristics.
Digital currency can be denominated to a sovereign currency and issued by the issuer responsible to
redeem digital money for cash. In that case, digital currency represents electronic money (e-money).
Digital currency denominated in its own units of value or with decentralized or automatic issuance
will be considered as a virtual currency.

DIGITAL AND TRADITIONAL CURRENCY

Most of the traditional money supply is bank money held on computers. This is also considered
digital currency. One could argue that our increasingly cashless society means that all currencies
are becoming digital (sometimes referred to as “electronic money”), but they are not presented to us
as such.

MOBILE DIGITAL WALLETS

A number of electronic money systems use contactless payment transfer in order to facilitate easy
payment and give the payee more confidence in not letting go of their electronic wallet during the
transaction.
 In 1994 Mondex and National Westminster Bank provided an 'electronic purse' to residents
of Swindon
 In about 2005 Telefónica and BBVA Bank launched a payment system in Spain called
Mobipay[13] which used simple short message service facilities of feature phones intended for
pay-as you go services including taxis and pre-pay phone recharges via a BBVA current bank
account debit.
 In Jan 2010, Venmo launched as a mobile payment system through SMS, which transformed
into a social app were friends can pay each other for minor expenses like a cup of coffee, rent
and paying your share of the restaurant bill when you forget your wallet.[14] It is popular with
college students, but has some security issues.[15] It can be linked to your bank account,
credit/debit card or have a loaded value to limit the amount of loss in case of a security breach.
Credit cards and non-major debit cards incur a 3% processing fee.[16]
 On September 19, 2011, Google Wallet was released in the US only, which makes it easy to
carry all your credit/debit cards on your phone.[17]
 In 2012 O2 (Ireland) (owned by Telefónica) launched Easytrip[18] to pay road tolls which were
charged to the mobile phone account or prepay credit.
 O2 (United Kingdom) invented O2 Wallet[19] at about the same time. The wallet can be charged
with regular bank accounts or cards and discharged by participating retailers using a technique
known as 'money messages' The service closed in 2014
 On September 9, 2014 Apple Pay was announced at the iPhone 6 event. In October 2014 it was
released as an update to work on iPhone 6 and Apple Watch. It is very similar to Google Wallet,
but for Apple devices only.

HARD VS SOFT DIGITAL CURRENCIES

A hard electronic currency is one that does not have services to dispute or reverse charges. In other
words, it is akin to cash in that it only supports non-reversible transactions. Reversing transactions,
even in case of a legitimate error, unauthorized use, or failure of a vendor to supply goods is difficult,
if not impossible. The advantage of this arrangement is that the operating costs of the electronic
currency system are greatly reduced by not having to resolve payment disputes. Additionally, it
allows the electronic currency transactions to clear instantly, making the funds available immediately
to the recipient. This means that using hard electronic currency is more akin to a cash transaction.
Examples are Western Union, KlickEx and Bitcoin.
A soft electronic currency is one that allows for reversal of payments, for example in case of fraud or
disputes. Reversible payment methods generally have a "clearing time" of 72 hours or more.
Examples are PayPal and credit card. A hard currency can be softened by using a trusted third
party or an escrow service.