Evolution of Money from Barter to Bitcoin
Different people may observe and consider money differently. For some, it might be credit cards, it might be notes, and for some, it might be other assets. In a real sense, money is something that serves as the medium for the transfer and exchange of goods and services.
The acceptance and forms of money have changed over the period of time. In earlier times, the community accepted a barter system, where people exchanged commodities and services with those who wanted them. However, it does not necessarily mean that every time a person who wants wheat in return for shoes gets a deal. This double coincidence of wants raised requirements for other forms of money like beads, gold and paper notes.
But how did one form of money get replaced by the other?
Anything can be considered money only when it serves the following functions:
Store of Value: The value should not depreciate with time.
Medium of exchange: Everybody accepts it as a medium of exchanging goods and services.
Unit of account: A standard unit through which the value of all goods and services can be measured.
Standard of deferred payments: Can be used to take credits and loans on acquiring goods and services.
Almost all forms of money possess the above properties. However, as people started getting stronger alternatives to the existing money, the older forms like beads and gold got replaced by paper money.
Paper money is a form of money that has existed for the longest time. But, with opportunities comes challenges. The biggest challenge of paper money is its control in central authorities' hands. The government can control its supply and print more whenever it wants, leading to economic downturns like inflation. A stronger alternative was significantly required to destroy the dominance of centralization and corruption, which is when Bitcoin was introduced.
It was hard for Bitcoin to make its place in the world's financial system. But people gradually started realizing how it justifies all the functions of money, is more decentralized and gives people control of their own money. They begin to accept it as the most trusted form of money. Many countries have already approved it as a legal tender, and many are in the queue. This is how money evolved from Barter to Bitcoin.
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