Money Basics

In the past, before money existed, people relied on a barter system instead of purchasing goods with money. For instance, if someone needed a shovel but only had chickens to offer, they might trade two chickens for the shovel. However, It had a fundamental problem and sometimes got complicated; For example, the value of a shovel is not equal to a horse and one needs something more than just a shovel.

To tackle this challenge, 2 solutions were devised :

• Credit

• Currency

It is very likely that people first went for credit, and for example, a person who needed a bucket of water, and had a shovel or a horse at home, would give a horse or a shovel to the other person for a certain amount of time or hours in exchange for a bucket of water. However, credit was not the solution to all problems, and it led people to the conclusion that they need a concept called currency with which anything can be traded. In fact, people needed to have common support regardless of the type of goods or services, based on which they could easily buy and sell goods and pay for them. The inhabitants of every area recognized a set of unique items, which were agreed upon by all, as an intermediate of exchange. For example, in a certain region they used sea shells and in another region they used cotton or salt as a medium of exchange. This system was named the "commodity money system". For instance, individuals who utilized salt as commodity money understood that salt was widely accessible from various sources and that numerous individuals could easily amass large quantities of it. Also, salt deteriorates after a long time and it is not possible to store it long-term.

These problems existed for other goods as well, which caused the market and buying and selling to be disrupted. Finally, due to the disadvantages of the commodity money system, i.e. the abundance of that commodity, its availability and easy acquisition, the inability to maintain it for a long time, and with different experiences, people came to gold as a monetary support; which had the characteristics of limited resources, hard extraction process and maintainability. Since then, in history, gold was considered as a support and money, and people bought and sold their goods with some gold according to the type and size of the goods. Gold was widely favored by individuals as a reliable asset and a prudent option, possessing the qualities of sound currency. Over time, people discovered that storing and moving large quantities of gold was challenging, and it was easier to steal gold than goods. For example, If a farmer owned 1000 horses, a thief could steal the most would be one or two horses. However, with gold, a thief could abscond with as much gold as the equivalent value of 100 horses at once. Hence, people once more sought a solution to this dilemma, leading to the establishment of traditional banking.

Bankers were affluent and reputable individuals with wealth and established facilities across various cities. Individuals and merchants entrusted their gold to banks and received a receipt in return. People could submit a receipt and receive their gold at any time in any of the cities where the banks were located if they needed their gold. Or give the receipt to the person they buy their goods from, who will receive the gold. Subsequently, the check system was established to streamline the process of buying and selling, making transactions more convenient. For instance, if an individual purchases an item valued at 5 coins and holds 100 coins in the bank, they would only authorize the seller to withdraw 5 coins. After the check, over time, the banking systems and today's currencies were formed. Money evolved to simplify and expedite the process of exchanging goods, services, and assets among people. The selection of gold as a form of currency is primarily attributed to its scarcity and the labor-intensive extraction process required to obtain it, so :

Anything that can meet these features, regardless of what name we give it (dollar, euro, ruble, rial, etc., or bitcoin, toncoin, ethereum, etc.) is worth turning into money. Understanding foundational economic concepts helps us grasp the principles behind cryptocurrencies and engage in more informed discussions about them.