An Overall Look at the Timeline of Money

History is the chain of blocks behind the introduction of discoveries, innovations, and developments. Therefore, it is insightful to go back in timelines to take an overall look at the paving stones that built the road we are walking on. Even though the systems involving money are highly complicated as they go back a thousand years with a direct link to anthropology, sociology, politics, and economics; I’ll try my best through this article to generally connect the dots between some major turning points.

As people began to experience life more consciously trying to fulfill their needs, they started to use trading as a form of exchange. Individuals and communities traded the materials they had with the materials they needed. However, the value of the items that were being traded was negotiable. Therefore, people needed a commonly accepted tool that would be the physical representation of value. With the invention of the first coins made up of gold and silver, trading has tremendously stepped up and greatly led to the development of civilizations worldwide. Yet, coins were too heavy to carry and hard to divide. Thus, paper money was started to be used to represent the value of gold. In the next hundreds of years, countries shifted to monetary systems based on gold following an agreement called the gold standard, referring to a regulation where central banks could print money as much as the gold they had in reserves. Still and all, sticking to the gold standard failed to revive the collapsing economies through the economical downfalls that were being faced after the First World War, and towards the end of the Second World War,  nations agreed on a common monetary order among themselves and switched to the Bretton Woods system in 1944 to revive the world economy which was in ruins. This changed the world’s economic order completely and the reserve currency became the US dollar, which resulted in other countries pegging their currencies to it. The fact that all currencies were indexed to the dollar created tension in the markets over time and the system collapsed in 1971 when the USA announced that it abandoned the gold standard. Instead, the United States went to allow the exchange rate of its currency to be set by markets. While this approach made sense in a fast-growing international economy, it has become problematic over the years with rising interest rates as there were no asset corresponding to the money that was in circulation. The regulations inevitably formed a system in which the prices increased regularly due to the excess amount of money printed, even if the amount of labor and production increased.

In 2008, a global financial crisis struck many countries, led by the USA. Although the triggering factors of the crisis were highly interconnected and complex, one of the most important factors that caused it was the fact that banks gave housing loans in very large amounts with low-interest rates and long repayments, creating an optimistic bubble. When this bubble burst, they ran into a cash shortage leaving many companies bankrupt, and because central banks began to pour money into the market because of the circumstances, inflation rates rose in considerably serious amounts. In the same year, a paper introducing Bitcoin and blockchain was published by an anonymous creator, Satoshi Nakamoto covering many aspects of the algorithm’s structure and proposing solutions to the existing problems such as the transactions involving an institution being easily monitored and traced, thus hindering privacy. Introducing an algorithm that would make it possible to process person-to-person transactions without a third-party-controlled system, the paper offered an alternative solution to eliminating the dependency on the banks. Even though the ideological and applicable foundations of cryptocurrencies were established long before the sudden burst in crypto, none of the first initiatives became widely spread until the introduction of Bitcoin. The fact that the trust people had towards banks was broken due to the crises might be why the 2008 economic crisis may have been a suitable ground for the actualizing of Bitcoin.

As of yet, it has been 14 years since the introduction of the first cryptocurrency that has successfully found its place in the market, and even though the dynamics involving finance and crypto are highly complex and there are too many events, and connections to simply state anything regarding these topics, the crypto market is currently going through the biggest downfalls since its major growth. Leaving the detailed explanation of the insights to an upcoming article, it is safe to say the interactions that we’ve been through whether they be communicating in any way to share and connect; or making agreements and transactions to trade, exchange and cooperate has led us to this point in time. Though the shape of how we run these processes has changed over the years along with our needs and expectations; digitalization has undoubtedly played a remarkable part in the era we are in. Along with increasing the rate of information sharing, it has connected us on a deeper level. Life-sustaining problems and systematic errors became more visible each day, resulting in constant change. Although it can be foreseen that history is being built in loops, different dynamics come together through a wide range of possible permutations. In light of that, this is undoubtedly a topic full of hidden gems that can only shine through digging deep into analysis and observations.

REFERENCES

https://www.withvincent.com/articles/cryptocurrency-timeline

https://en.m.wikipedia.org/wiki/Financial_crisis_of_2007–2008

https://www.coindesk.com/layer2/2022/07/12/satoshi-wept-how-crypto-replayed-the-2008-financial-crisis/?outputType=amp

The Cryptocurrency Crash Is Replaying 2008 as Absurdly as Possible

What Is Cryptocurrency – How It Works, History & Bitcoin Alternatives

https://bitcoin.org/bitcoin.pdfhttps://river.com/learn/what-is-the-double-spend-problem/

https://www.investopedia.com/terms/d/doublespending.asphttps://en.m.wikipedia.org/wiki/History_of_banking

https://www.bloomberg.com/opinion/articles/2021-11-04/currency-history-regulation-and-crypto-s-future?utm_medium=cpc_search&utm_campaign=NB_ENG_DSAXX_DSAXXXXXXXXXX_EVG_XXXX_XXX_Y0469_EN_EN_X_BLOM_GO_SE_XXX_XXXXXXXXXX&gclid=Cj0KCQjwyOuYBhCGARIsAIdGQRNKL7yu5xA3jF2Yw9y9KCPcDkkgLuQ1xlspkyvJGqK8htq9AHjXXu0aAsFQEALw_wcB&gclsrc=aw.ds

https://www.investopedia.com/articles/07/roots_of_money.asp

https://en.m.wikipedia.org/wiki/Nixon_shock

https://www.history.com/news/how-did-the-gold-standard-contribute-to-the-great-depression