Cryptocurrencies

From precious metals to Bitcoin (BTC), once upon a time there was money – Cryptocurrencies

While 2020 will have marked a turning point for many models of society, mainly economic with the skyrocketing price of Bitcoin (BTC) and Gold at the same time as central banks are trying to save the day of a particularly chaotic, we decided to briefly retrace the history of money. On the one hand, because it allows a better understanding of the object of curiosity that it arouses and on the other hand because it specifies the ideological vision that it conveys over the centuries: passing from an ostentatious symbol to the pillar of current exchanges and to the re-questioning of the notion of trust with the advent of Bitcoin. At a time when everyone is wondering about the intrinsic value of money and its near future, let’s retrace the history of money, from the Neolithic period to Bitcoin.

In the beginning was … from barter to the unit of exchange to precious metals

First, let’s take a step back, imagine that we are two farmers from the Neolithic period. You have grain, I have cows, and we both decide to trade. This direct exchange of goods is called barter, and it looks good in principle, but has proven to be woefully ineffective. Why ? Because barter suffers from the double coincidence of needs. For an exchange to take place, both parties must want the exact object that the individual is willing to exchange. Everyone is therefore forced to wait for the perfect configuration of exchanges to operate, which prevents many exchanges from taking place.

Anthropologists believe that it is unlikely that the money actually comes from barter, but it is nonetheless interesting to treat barter as a base case.

The first observed protocurrency took the form of collectibles. Representing small, often homogeneous objects, such as seashells or pearls, collectibles are generally durable, easy to store or hide, difficult to find or forge, and easy to value. They are therefore more robust forms of money than many forms of “convenience currency”Like cattle.

Some historians claim that the money came from collectibles, and others claim that the money came from credit. In this context, credit refers to the simple human counting of favors: “I’ll let you borrow something, and I hope you pay me back later”. Given the narrow nature of human tribes, it is possible that credit dominated many social relationships.

This type of functioning worked well within the framework of tribes in the Neolithic era, but with the development of societies, this is no longer enough.

To orchestrate larger companies, it was necessary build a mature monetary system.

Which brings us to a first question: what does it take for something to turn into money? We will come back to it quickly.

But before that, let’s finish this little preamble. Money therefore came to solve the disturbed equation of barter: with each object to be exchanged, the idea of ​​matching a quantity of money; and, the possibility of splitting the currency into fractions (cents for euros for example).

Gradually, certain objects to which peoples attribute an exchange value were easy to store and were able to constitute a currency of exchange. In fact, it is from the salt that the word “wages” is derived from the Roman era.

Metal coins arrived in -650 in Anatolia and then in Ancient Greece. The denarius, a Roman invention, is the first to bear a value inscribed at the end of the 3rd century BC. Over the centuries, each kingdom or Empire created its own currency in order to facilitate trade and unify its territory. This is how money gradually became a symbol of economic and military power.

Roman denarii
The deniers

It was not until 1750 that the first international currency appeared: the thaler, which gave the dollar its name, and was gradually tamed by the Spanish and English colonies in America.

Money, then made of precious metal, had real value, measured by its weight, and served as an ostentatious symbol, and symbol of exchange.

The economic definition of money was first proposed by William Stanley Jevons in 1875. According to Jevons, money has three main properties:

  1. Store of value ;
  2. Medium of exchange ;
  3. Account unit.

What I’m telling us at the end of the day is that basically almost anything can be money, but not much really is. If you are looking for candidates, it doesn’t matter whether it is physical or digital, metal or paper: if it is durable and there is more than one, it can be money if the circumstances are right. lend it. But let’s go a step further and look at the ideological aspect of money.

Money: from safe haven to trust, a tool of sovereignty and a tool of exchange

Money is the best story ever invented and told by humans, because it is the only one everyone believes in. Trust is the raw material from which all types of money are made

Yuval Noah Harari in his book Sapiens

The evolution of money only really begins with precious metals. Initially, pieces of gold and silver were used directly as forms of currency.

But, why did you have to mint coins back then? Why not use pieces of gold and silver directly?

The answer comes from the very definition of money, which standardizes payment quantities. First appeared with mercenaries and armies organized for their compensation needs, paper money, on the other hand, did not arrive until AD 1000, 1600 years later. The latter was invented in China during the Song Dynasty and was exported to Europe by Marco Polo.

first tickets or paper money in China
First banknotes or paper money

Song Dynasty banknotes were supposed to be redeemable for fixed exchange rates in gold, silver, or silk. But in practice, conversion was never allowed. The first paper money was arguably also the first fiat money, or “Fiat” which literally means “by faith”. A fiat is a currency which has no intrinsic value, but which has value only because the parties exchanging it agree on its value, or because a third party uses its power to maintain this. value. Fiduciary money therefore contrasts sharply with commodity money, which has intrinsic value.

David Graeber speculates that the reason fiat money originated in China is because it was the only government centralized and powerful enough to impose top-down control over their national economy. Is there a connection to the advent of a CBDC by China among the first? (I digress).

Money is just a bubble that never bursts

Peter Thiel

A second aspect specific to money is the concept of trust. At the annual conference organized by Aucoffre.com and Veracash Edwin the Heron evoked this notion, central today in the ideology of blockchain and Bitcoin.

“Money is law. The infinite desire for monetary wealth is a destructive force for the city ”.

Aristotle

He thus develops the vision according to which money is used primarily for transactions and constitutes a public good at the service of all. Several economic theories have clashed for years around the ideological fundamentals of money.

With Keynes, for example, there is a duality: he talks about endogenous currency directly linked to production (a rare currency would be dangerous); and on the other hand, he claims that money can be a stock. Since we are in a world of uncertainty, according to him, it is in his interest to hold liquid wealth (gold, money) and he develops his theory of the preference for liquidity.

Diagram showing the different functions of money
Source: European Central Bank

This ambivalence of money, which both circulates and is a stock, has always existed. Gold has also had this double vision in history. At first it was a currency. The gold coins already had value. This also raised the question of confidence because the stock of gold had to match the banknotes in circulation.

But from the 20th century, gold becomes too scarce and no longer works in flow but in stock since it then becomes a reserve asset.

Bitcoin, designed in 2009 as a flow currency, with a high rarity, is also becoming a stock asset. But there is no merchandise value quid pro quo behind it. It is a mimetic stock. In local currencies, there is this melting side, if you keep the currency too long, it loses its value. But that is not the case with Bitcoin.

Over time, governments have gained much greater control over their national economies through technological advancements and more developed bureaucracies. And with this control came the economic normalization of sovereign currency.

The advent of banks and sovereign currencies

European Central Bank
European Central Bank

Today, the majority of financial transactions are mediated by banks. But banking is a relatively recent invention in monetary history.

Paper money finally arrived in Europe in 1661 in the form of Swedish banknotes. Before centralization, each bank issued its own banknotes, usually exchangeable for gold held in the bank’s reserves.

After World War II, the United States became the world’s financial superpower and used that power to spearhead an international monetary system : Bretton Woods. Within this framework, all the great world powers fixed the exchange rates of their own currencies against the dollar, the dollar itself being pegged to gold. This has helped stabilize the exchange rates between the major currencies of the world.

The current international monetary system is now undergoing an unprecedented economic crisis. While central banks focused on pricing their currency as a direct rate of interest, in 2008 the economic crisis sent interest rates plunging below zero. Yes, negative interest rates. Henceforth, combining quantitative easing policies and liquidity injections into the real economy, especially since COVID-19, their profitability is no longer there. This situation benefits gold, precious metals more broadly, but also cryptocurrencies such as Bitcoin, which have succeeded in breaking out of traditional channels.

Christine Lagarde, the president of the ECB, has recently announced that she wants to contribute to the objective of refinancing neutrality which must now be used for ecological transition, a first.

Money should not ultimately be too scarce, nor too abundant, it always constitutes an anticipation of the wealth linked to innovation.

From physical currency to dematerialized currency

diagram showing the evolution of money from barter bitcoin
The evolution of currency from barter to Bitcoin

Since the advent of money, many technologies have made it easier to pay money: paper bills, checks, and letters of credit all have ancient origins.

But modern payment technology really began to evolve with the invention of the credit card. Although credit cards have been around since the 1920s, the idea of ​​a credit card as a universal means of payment did not emerge until the 1950s. By the 1980s, credit cards had become ubiquitous in American and European society.

The second iteration of payment technology was the Internet, adopted in the 1990s. Internet native payment systems eventually emerged, such as Cybercash and DigiCash. The first highly successful online payment company was PayPal in 2002, which went public and was subsequently bought by eBay for $ 1.5 billion.

Today, the dematerialization of money allows new uses and a new era of liquidity and exchanges. Methods like Paypal, electronic wallets like AliPay or Skrill, and in some countries, cash on delivery exist. With the advent of cryptocurrencies, this landscape has evolved further.

Percentage of mobile payment by country
Percentage of mobile payment by country

The history of mankind has seen many developments and considerations around the role of money. But the great revolution of our century is in many ways to be found in that generated by Bitcoin, this cryptocurrency popularized in 2009 by the famous Satoshi Nakamoto who has since ignited the assembly. In 2010, a bitcoin was worth $ 0.003, and in December 2017, Bitcoin hit its all-time high at almost $ 20,000 per bitcoin, a level equaled a few weeks ago, an increase of 6,000,000x. But Bitcoin’s story is not just about price: its genesis is deeply rooted in ideology. From the ideology of ultra-liberal cypherpunks to the growing adoption by individuals and corporations today, the cryptocurrency movement is only at the beginning of the new monetary revolution. To the moon …

VeraCash then Veraone, at the crossroads of two worlds

photo map and Veracash application
Veracash

The story begins in 2009, when the creation of Aucoffre.com in the midst of the economic and financial crisis. Jean-François FAURE, CEO, decides to democratize and make precious metals more accessible as an alternative to banks, outside the banking system and state control. At the start of the concept, two precious metals: gold and silver, as two tangible, stable and even safe values ​​in times of crisis unlike money. With the little extra that when financial markets collapse, the value of these metals explodes. From this idea, this visionary of money continues its expansion, takes up the challenge of dematerializing metals and creates in the wake in 2014 Veracash with the firm conviction that it is now appropriate to initiate a historic turning point and constitute an original neobank, always outside the traditional circuits.

With the creation of an account and a bank card backed by precious metals, you can now pay and save with our precious metals. He then fully surfs the wave of dematerialization that we are experiencing today and begins to make a name for himself in theEnvironment of neobanks. To continue this growth and establish this particular positioning, the company is even organizing a fundraising in 2021.

Finally, the last born of the siblings, Veraone and its VRO token arrive on the market in 2019 to offer a crypto offer still backed by our precious metals and more particularly gold.

Card Veracash and Aucoffre
Location of Aucoffre and Veracash

Finally, on closer inspection, the story of Jean-François Faure and all his teams is enough to count the history of money in a decade, and shows us how much the oldest values ​​in the world are still relevant and constitute, in addition to modern technological tools, a safe haven at all times.

From the history of money we retain the fundamental principles related to value and trust, which are at the center of blockchain ideology today. From precious metals to Bitcoin, the Mint does not stop making us think and rethink our beliefs. If you too are interested in these great stories and the explanation of precious metals, visit the alternative investment platform !

Tags

Related Articles

Back to top button
Close
Close