Tuesday, October 10, 2017

Currency Evolution: Trades, Exchanges, Money into Blockchain & Beyond


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Wealth creation had to have a start. If we look around, you'll see that physical currency, whether in trades or business cents (sense) has evolved.  

Let's begin..........

   Remember back in school when we would offer a bag of chip for someone else's juice box.......a simple trade right?  An exchange of goods for other goods without the use of currency aka money.  

   Long before money was invented, this transaction for exchanging services or goods called "bartering" were used. A process of trading services and/or goods between two parties without the use of money or physical currencies.

   These goods could be spices, furs, crafts, weapons, livestock, foods and of course, work. If you had a specialized skill that could be use, you might work for room and board. Salt, was a very popular spice and of such value back then, that Roman soldiers were paid with it.

   Bartering took time though......there was negotiations, knowing who you were negotiating with, different customs and the value of the items to be bartered.  Then there was the fact that what if what you had to offer was not what the other wanted or vise versa. 

Bartering back then....."I have what you need" was the call of the day. 

          One trader may have spices & fur, you may need weapon and wheat. So you can see where issues would arise.

Physical currencies or money would speed transactions up. 

   To make it work efficiently there has to be a value tied to this physical currency.... like rubies, gems, silver, gold & diamonds. 

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Let's step back a bit.......

   As early as 1100BC items like axes & tools are believed to be used in China. Out of which the first coins were established. Around 600BC King of Lydia (a part of Turkey) established the official currency minted out of silver & gold. Somewhere 1200BCish, China had upgraded to paper currency. Being lighter and compact. 1600AD brought paper currency to the European banks. 

  As the U.S. colonies were themselves establishing their independence, the Massachusetts Colony created their own coins (1652). They also issued the Americans earliest notes (1690). The U.S. first cent was authorized in 1787, made of copper called a "Fugio" cent. President Abraham Lincoln signed the National (Currency) Banking Acts of 1863.

   With markets opening up by banks and ruling governments for which participants from across the globe exploded into international trades.


  Banking notes, currency markets and the need to determine comparative values on the many currencies. Brings the 17th century the first active foreign exchange market or forex to Amsterdam.

The evolution of currency did not stop there. 

   21st century trades introduces society to not only digital, mobile payments, but virtual currency as well. 

   Electronic (e) cards……credit, debit & check cards are abundant in our society today. Direct-deposit, online banking and almost every payment (car, house note etc.) you make can be processed online through some form of digital media. Do you really even see your money in hard form anymore?

   Along comes an aspiring technology called "Blockchain". This distributed ledger works ingeniously with the internet. A simple explanation breaks it down as......

Make an transaction, that request is expressed through a Peer-2-Peer network called Nodes (a network of computers). Algorithms validate the status & transaction. Once verified whether it records, music, contracts, videos, digital ads or of course cryptocurrency. A new "Block" is created with all transaction for the ledger. This new block is added to the chain and can not be altered. It is permanent. Transaction completed. Data is transparent within the network, making it public. Yet, one would have to override the entire network to corrupt (hack) the data.

   In 2008, a programmer and/or associates noted as "Satoshi Nakamoto" issued a paper outlining "Digital Currency" and in 2009 initiated software that generated cryptocurrency & the first "BITCOIN" network . Bitcoin is not a physical coinage. It is a decentralized authority, no government nor central banker has the power. Where as all other forms of currency are government/bank issued. Bitcoin, a cryptocurrency that is fast becoming a household name.

   For now, understand the difference between virtual, digital & crypto currency.

Virtual CurrencyIs a type of unregulated, digital money, which is controlled by its developers. Accepted among it's specific virtual community. Say, PS4 gaming format, online game programs where currencies are only of value within that particular game or system. How about those virtual casino games. Those winning can not be use in the real world.

Digital Currency ~ Is a form of virtual currency that is electronically created and stored. For instance, Paypal, Android pay, Apple pay or Visa checkout. All transactions are strictly executed in a digital online format.

Crypto Currency ~ Is a subgroup of digital currency that uses cryptography for security. However, some types of digital currencies are cryptocurrencies. 

      Money ~ Then & Now

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