While people had fun and partied, waving the horrible 2020 goodbye, I was cuddled up in my room reading, as the introvert that I am. My last book for the year happened to be Homo sapiens: A brief history of mankind by Israeli historian, Yuval Noah Harari. The book, which I am still reading at the moment provides profound insight into our history as a species and I thought it good to share a few lessons I learnt from it in my next substack post which I am now writing but it was quite a dilemma in my brain deciding which of the numerous lessons I was going to share. The anti-religion sentiments in me wanted to elucidate more on the evolution of mankind and why the creation theory might be more of a farce rather than factual submissions, but after much thought and consideration, I decided not to start the new year with violence and so I settled for a less controversial topic the concept of money.
The topic was also partly inspired by the rise of bitcoin and other cryptocurrencies as an alternative means of payment and transaction. As the value of cryptocurrency rose over the years, I have been studying and learning the underlying concept behind money to understand how it works and one of the interesting things I have learnt about the adoption of money is that the items that we attach monetary value to are worthless in themselves, they only get their worth based on the value people placed on them. Take for example, the bank notes we know as money today is paper, they only get their value due to the worth we humans place on them and also because we have the government backing it. Should the government remove that backing, as we always see when the government decides to abandon old notes to create new ones or should we witness an hyperinflation as in the case of Zimbabwe or Venezuela, these notes becomes useless.
Items such as cowries, sea shells, beads also fall in this category, they were at a point in history used as money and had some sort of value, but as soon as humans moved on to other items as a means of exchange, these things returned back to being worthless as they were.
Another intriguing detail I discovered was that anything could become money as long as people believed in it and are willing to trade with it. Those of us that attended boarding schools, might have been a part of this without even realizing it. In boarding school, some items functioned as money because people were willing to trade with them. In my own school for example, it was moin-moin. A lot of trade happened just with a nylon of moin-moin. Infact, a lot of people collected items from their peers on credit, anticipating the day when moin-moin would be served so they could pay their debts. With moin moin, we already developed a nascent financial ecosystem. Noah Harari made a point of how cigarettes served as a form of money for prisoners, the price of item were listed in cigarettes, a loaf of bread cost 12 cigarettes, 300 grams of margarine cost 30, and a litre of alcohol cost a whopping 300 cigarettes. The point here is, as long as enough people in a given place and time are willing to trade with a particular item, it could serve as money. This particular concept has been the driver behind the meteoric rise of bitcoin and other cryptocurrencies. A lot of people are losing faith in the current monetary system as world currencies lose their value year by year due to governments and central banks inspired inflation. The current system is losing its place as a means of preserving wealth and so people are fleeing to monetary systems devoid of government intervention, and in cryptocurrencies powered by the blockchain, they found a saviour. Going by the point made earlier, cryptocurrencies in themselves don’t have any value, it gets its worth because humans are willing to trade with it, and put some sort of valuation on it.
Money as we know it has come a long way through history, from the days of trade by barter to the times of coins stamped with the faces of kings and emperors, now to our own days where we flaut papers imprinted with the faces of revered leaders of the various nation states, engraved with the seals of central banks and catchphrases. As it will always do, money's changing and for the first time ever, it's becoming fully virtual, only existing in computer networks managed by geeks, but remember, as long as enough people are willing to trade and exchange with it, it will be money.
All money is a matter of belief - Adam Smith
Yeaaa
Nice piece! It's an eye opener