Money is one of the most important things in our society. It allows us to buy goods and services which are essential. Money has changed dramatically throughout history and right now we are seeing it change as well. The future of money will not look like it does today. Let’s take a closer look at the history and future of money.
Before there was money there was barter. People would trade the things they had for the things they needed. It doesn’t take long to realize that this was an incredibly flawed system. One of the key issues with barter was that it was not divisible. This means that if you sold fridges and only fridges, and you wanted to buy a bar of chocolate. You couldn’t give the shop keeper a fraction of a fridge. The second issue was that it relied on something called the ‘double coincidence of wants’. You had to have a fridge and need a bar of chocolate. And the chocolate owner had to have chocolate and want a fridge. This is an unlikely event and would rarely align so easily.
Soon barter was replaced by gold and other precious metals. These were divisible, and had value, and overcame the coincidence problem. However, gold is heavy and it was dangerous to carry around large bags of gold. Instead, people would accept a note of value instead. This meant that if you bought something, rather than take the gold you would take a note saying you were owed 20 gold pieces. You could then use this as currency, the first paper currency was born.
Fast forward many years and we are now at a point where an electronic currency has become popular. We save our money in the bank and then pay for transactions using cards and online bank accounts. This is a secure and effective method. However, some people feel it is not the most efficient and fair method. We have to pay banks for these services and these currencies that we use alter value based on inflation and deflation.
This is why people invented cryptocurrencies. Cryptocurrencies have the potential to dramatically change how we use money. We could get rid of national currencies and use an international independent currency instead. It sounds perfect but the existing giants of the financial world and governments are not such big fans. They don’t want to lose the stranglehold they have on the financial market and are therefore unlikely to retire their currencies. Instead what we may see is traditional currencies starting to have many of the same traits as cryptocurrencies.
In the future, we may see that our currencies lose their physical paper form and become entirely online. We may see that at the foundation of these currencies is a blockchain secure technology that allows the currency to be secure and traceable.
While we likely never see a point where there is one currency in the world we do expect to see an increased fragmentation and segmentation of currencies. Due to the rise in cryptocurrencies, we expect to see the growth of currencies in the world. There will be a cryptocurrency for everything and you may see your favorite fast food restaurant introduce its own currency in the future. Yet at the same time, we will see a reduction in national currencies. Smaller individual currencies will see that there is little reason to have their own currency and will instead adopt and tie themselves to a larger stable currency. This is a risky move as you sacrifice some monetary policy but it has been done by a number of small nations already.
The future of money is uncertain but what is certain is that it will look nothing like today. Transactions will move entirely online and while it is unclear what the exact medium will be, it will have to be easy, efficient, and low cost. Time will tell who wins the war over the future of money, whether it is existing governments, existing financial monopolies, or a new innovation.