You might have heard in recent weeks about Bitcoin millionaires — people who raked in vast sums of real money riding this relatively new form of currency.
Bitcoins offer both a fascinating, new approach to money and many potential pitfalls. Here’s what you should know about this online phenomenon.
The history of money is fascinating. Ancient humans traded salt for fish, wheat for beer, and camels for wives. Around 9,000 BC, give or take a millennium or three, people started using an intermediary object — something they might not need but could exchange. For example, I’ll take onebag of rice for my duck; I’ll give you a half-bag of rice for that small clay pot or a whole bag for that big pot.
In Asia, cowry shells (considerably easier to carry than bags of rice, no doubt) were used long ago for bartering. But as trade expanded around the world, more sophisticated forms of “currency” were needed: bronze-cast knives in China, silver bars of set weights in Mesopotamia, gold bars in Egypt.
Around 700 to 500 BC, the first coins appeared — typically, stamped bits of naturally occurring silver/gold metal called electrum. Minted coins followed, their value dictated by the weight and fineness of gold or silver used. Coins from Athens, Persia, and China circulated all over the world.
Around the 11th century, paper money appeared alongside coins in China. In Europe, the first paper money was a sort of IOU used to document loans in gold. The IOUs gradually formalized into official banknotes.
In the 17th century, European governments (and much of the world soon after) moved into the business of issuing paper money, backed by deposits of gold and silver.