How did people trade before money? The answer most of us learned at school goes like this: a farmer with grain wanted shoes, the shoemaker did not want grain, and after enough failed swaps someone settled on a thing everybody would take. Metal won. Coins followed, then paper, then plastic cards and phone apps.
That is the textbook history of money, and it is at best half right. The record that survives tells a different story, one about bookkeeping. Long before the first coin, temple scribes were writing down who owed what, in barley and in weighed silver. This lesson follows that record, the ledger, from clay and stone tablets to the Bitcoin blockchain, with the facts as of October 2026.
If you have not read it yet, our previous lesson on what money is and the jobs it does gives the definitions this one relies on.
Did the barter system come before money?
The barter story is old. Adam Smith set it out in The Wealth of Nations in 1776, where he traced trade to “the propensity to truck, barter, and exchange one thing for another”. He listed cattle in Homer, salt in Abyssinia, dried cod in Newfoundland and tobacco in Virginia as early money. Read closely, though, Smith writes that such things “are said to be” used and that his sequence is “probable”. He was reasoning from first principles, not reporting field evidence.
Anthropologists have pushed back for decades. The best-known challenge came from David Graeber, whose 2011 book Debt: The First 5,000 Years argues that credit and obligation came first, and that barter mostly happened between strangers or among people who knew money but could not get hold of it. He leans in part on a 1985 paper by the anthropologist Caroline Humphrey for the point that no economy run purely on barter has ever been documented.
Critics answer that the missing pure-barter society proves less than it seems. Economists quoted by the Foundation for Economic Education point out that barter can matter a great deal without ever being the only way a society trades.
Nobody can settle the question from the evidence we have. What can be traced is the bookkeeping. At every step in the evolution of money, two questions decide how it works: who keeps the record, and who is allowed to create new units? A temple, a king’s mint, a private bank, a central bank, a card network and finally a network of computers have each held those two powers. Most of them, at some point, abused them.
Before coins: accounts in barley and silver
The oldest money we can document is not an object. It is an entry. The British Museum’s Money Gallery sums up the evidence from Egypt and Mesopotamia, between about 2500 and 100 BC, in one line: sophisticated systems of accounting and payment existed long before coins were introduced.
One stone tablet in the museum, dug up at Dilbat in what is now southern Iraq and dated to about 2400 to 2200 BC, lists land bought by a man named Tupsikka. The price of one field is set in barley: 90 gur-sag-gal, which the museum converts to 21,600 litres, plus an extra payment in barley, wool and oil. Nobody needed to haul the grain across a market square for the deal to count. The scribe wrote it down, and the record was what mattered.
Silver did the same job by weight. The unit most readers will recognise is the shekel, first attested around 2150 BC and reconstructed by historians at roughly 8.4 grams. In the administrative accounts of the temple institutions of Girsu, in southern Mesopotamia, scholars find a recurring rate of one gur of barley, a measure of 300 sila, to one shekel of silver. Accountants could therefore price wool, labour, land and debts in a single unit, whether or not any silver changed hands.
Egypt kept a similar habit. The El-Amarna hoard, buried between about 1352 and 1336 BC, holds bars, rings and scraps of gold and silver, some cut up for particular transactions. According to the museum, the metal itself often did not move when a payment was made. What the scribes recorded were agreed amounts or weights of metal, used as units of account.
The first keepers of the money ledger, then, were institutions with scribes: temples and royal administrations. They also set the rates between barley and silver. Nobody had minted anything yet.
Cowries, salt, cattle and a stone that never moved
Outside the record-keeping states, people used goods that were scarce, durable and easy to count. Smith’s cattle, salt and dried fish belong here. So do shells.
In China, according to the British Museum, strings of cowrie shells were used in royal gifts and payments from around 1000 BC, carried far inland from the coast. Inscriptions on bronze vessels mention them. The species is Cypraea moneta, the money cowry, and the Chinese character for treasure still contains the sign for a cowrie.
Cowries had a second, much later career in West Africa, where most accounts date their mass use to after the 1500s, when European ships brought in shells gathered in the Indian Ocean. Historians tie that trade closely to the Atlantic slave trade. The memory survives in Ghana’s currency: the Bank of Ghana says the name cedi, introduced in 1965, comes from the Akan word for cowrie.
The most famous commodity money barely moved at all. On the Pacific island of Yap, people used rai: wheels of limestone quarried mainly on Palau, some 250 miles (about 400 kilometres) to the southwest, according to a 2004 commentary by the Federal Reserve Bank of Cleveland. Some are a few inches across. The largest reach about 12 feet (3.6 metres) and weigh thousands of pounds.
When a big stone changed owner, it often stayed where it stood. The community remembered that it now belonged to someone else. The American writer William Furness, in a 1910 book on the island later quoted by Milton Friedman, tells of a stone that sank at sea on the way from Palau and was still counted as wealth, because everyone agreed it was down there. Treat that story as oral tradition. The principle behind it holds: on Yap, the record of ownership lived in the shared memory of the village. It is the same idea, at village scale, as the shared record described in our guide to how a blockchain works.
Lydia stamps the first coins around 650 BC
Coins arrive late in this story. The British Museum dates the first ones to about 650 BC and says they were probably made and used in Lydia, a kingdom in what is now central Turkey; studies of the earliest deposits push some dates a little later, into the 600s BC. They were made of electrum, a natural mix of gold and silver. Irregular in shape, each was struck to a strict weight standard.
The Greek historian Herodotus credited the Lydians with the first gold and silver coins, and some early pieces carry inscriptions in Lydian. Electrum had a flaw, as the archaeologist John Kroll explains in an essay for the Sardis Expedition: its share of gold varied and it could be diluted, so a buyer could not be sure what a piece held. Under King Croesus, around 560 to 547 BC, Lydia became the first state to strike separate coins of gold and of silver. When the Persian king Cyrus took Lydia in 547 BC, Persia kept the system and spread it.
The museum admits that we are not sure why the first coins were made. Their effect is easier to see. A royal stamp vouched for the weight and the metal, so traders no longer had to weigh every piece. Part of the ledger now travelled inside the coins themselves, and the power to create units sat with whoever ran the mint.
China reached coinage by its own road. During the Warring States period (475 to 221 BC), states cast bronze coins shaped like spades, knives and cowries. After the Qin unified China in 221 BC, the round Qin coin became the standard for about 2,000 years.
When did paper money start? China’s flying money and the jiaozi
Bronze and iron coins are heavy. Under the Tang dynasty (618 to 907), paper called “flying coins”, or feiqian, came into use for sending large sums over long distances. The British Museum calls it the world’s first paper money, although it worked more like a remittance order than a banknote you could spend in a shop.
The next step came in Sichuan, a province that used iron coins, which were even bulkier. Merchants there issued private paper notes, called jiaozi, that could be exchanged for coin. Some issuers went bankrupt. The Song government took over: it set up an official note office in 1023 and from 1024 issued standard notes under state control. Numismatists often call these the first government paper money, though the label depends on how paper money is defined.
The state soon found the temptation this lesson keeps meeting. Printing notes was cheaper than raising taxes, and the jiaozi lost value as issues grew; by 1105 the notes were being declared void unless swapped, at a steep discount, for a new note. Later dynasties tried again. The British Museum holds a Ming note, first issued in 1375, worth one string of 1,000 coins.
With paper, the ledger moved again. A note was a written promise. It was worth what the issuer’s word was worth, and only as long as the issuer did not print too many.
Florins, ducats and the first banknotes in Europe
Medieval Europe ran mostly on silver coins of uneven quality. Two Italian gold coins changed that. Florence began striking the florin in 1252, and Venice answered with its ducat in 1284; both kept their weight and fineness steady for long stretches, and the British Museum notes that they were trusted as trading coins across Europe from the 1200s on. A merchant in Bruges or London knew what a florin held.
Europe’s first banknotes came from an unlikely place: Sweden, a copper country whose largest copper coin, the Riksbank says, weighed almost 20 kilos. Johan Palmstruch’s Stockholms Banco, Sweden’s first bank, received its charter in 1656. Trouble began in 1660, when the government minted new, lighter coins and depositors rushed to take back the old, heavier ones. Palmstruch answered with “credit notes”, from 1661, which the Riksbank calls the first real banknotes in Europe.
The new part was that the notes were not linked to any deposit. The bank lent them out, and they worked because people believed it would pay coins on demand. They were far handier than copper plates, so they caught on.
It did not last. The bank printed more and more notes, they lost value, and holders rushed to redeem them. The bank had too few coins and started calling in its loans. In 1664 the government of the day, the royal council, ordered the loans repaid and the notes withdrawn. Palmstruch was sentenced to death in 1668 for mismanaging the bank, then reprieved; he stayed in prison until 1670 and died the following year.
Out of the wreck, in 1668, the Swedish estates set up a new bank, Riksens Ständers Bank. Today it is Sveriges Riksbank, which calls itself the world’s oldest central bank.
The Bank of England, 1694
England’s turn came a generation later, and for a different reason: war. The Bank of England was founded on 27 July 1694 as a private bank working with the government’s finances, mainly to pay for the war against France. King William and Queen Mary were among its first stockholders. Its royal charter speaks of promoting “the public Good and Benefit of our People”. It opened on 1 August 1694 in Mercers’ Hall, Cheapside, with 17 clerks and two gatekeepers.
This was a new kind of ledger keeper: a company owned by shareholders, whose notes and accounts were tied to the state’s own borrowing. Over the next two centuries its notes became Britain’s main paper money, and the Bank grew into the role we now call a central bank.
John Law and the assignats: paper money collapses twice in France
France learned the risks of paper money twice in less than a century. The first lesson came from a Scot, John Law, who set up a bank in France in 1716. In 1718 the government bought it and renamed it the Banque Royale. Law also ran the Mississippi Company, which held trading rights in French Louisiana, and the company absorbed the bank in February 1720.
Notes bought shares, shares were swapped for notes, and the price of both rose on hope. In 1720 shareholders demanded cash, the bank faced a run, and the share price collapsed in the second half of the year. The company went into receivership in April 1721. London had its own bubble the same year, around the South Sea Company.
The second lesson began during the Revolution. From December 1789 the Assembly authorised assignats, paper secured on land confiscated from the Church and the crown. They started as interest-bearing bonds and soon circulated as money. The government had bills to pay, and printing more assignats was the easy way. Their value collapsed. They were replaced in 1796, and by most accounts stopped being legal tender in 1797.
Napoleon’s France rebuilt on firmer ground. The Banque de France was founded on 18 January 1800 by a group of bankers, at the urging of the First Consul. In 1803 it won the sole right to issue notes in Paris, and the law of 17 germinal year XI (7 April 1803) defined the franc germinal in silver and gold. Through several reforms, the franc lasted until the euro.
The gold standard, from sovereigns to Bretton Woods
The fix most of the world settled on in the nineteenth century was simple to state: tie paper to a fixed weight of gold and let anyone wallet senza affidare la custodia dei fondi a una società.">swap notes for metal. The issuer still kept the ledger, but the gold rule limited how many units it could create.
Britain led. For years during the Napoleonic wars, Bank of England notes could not be exchanged for gold. The British Museum dates the return of a gold standard to 1817. Peel’s Act of 1819 set a staged path back to full convertibility by 1823, and the Bank in fact resumed paying out gold in May 1821. As the museum puts it, after 1821 Bank of England notes were backed by gold.
The United States had defined its dollar in the Coinage Act of 1792, which also created the US Mint, and officially adopted the gold standard in 1900. In 1865 France, Italy, Belgium and Switzerland formed the Latin Monetary Union, which set common standards for their gold and silver coins and let them circulate across borders.
Italy had only had the lira since 1861. Six banks could still issue notes, and one of them, the Banca Romana, was found to have put far more in circulation than the law allowed. The scandal led to a reform of the note-issuing banks and, in 1893, to the creation of the Banca d’Italia, which became the sole issuer in 1926. Economists usually date the classical gold standard, when most big economies tied their currencies to gold, from the 1870s to 1914.
The Federal Reserve, 1913
The United States came late to central banking. In the panic of 1907 it was the only major financial power without a central bank, and the financier J. P. Morgan organised private money and credit lines to steady the banks. The answer was the Federal Reserve Act, signed by President Woodrow Wilson on 23 December 1913. A public system now held the reserve accounts of American banks and issued Federal Reserve notes.
The gold rule did not survive the twentieth century’s shocks. Countries suspended it during the First World War. In the Great Depression people hoarded gold coin; Britain left gold in September 1931, and the United States abandoned the gold standard in 1933.
In July 1944, 730 delegates from 44 nations met at the Mount Washington Hotel in Bretton Woods, New Hampshire, to rebuild the system. The Bretton Woods agreement kept other currencies within a 1 percent band of the US dollar and fixed the dollar to gold at $35 an ounce. It also created the International Monetary Fund and what became the World Bank. Gold now sat one step behind everyday money: people held dollars, francs or lire, and only the dollar was tied to metal.
15 August 1971: the dollar’s gold window closes
The Bretton Woods promise rested on the United States holding enough gold. At the start it held about three quarters of the world’s official reserves, but dollars kept piling up abroad. A London Gold Pool, formed on 1 November 1961 to hold the market price near $35, broke down in March 1968.
From 13 to 15 August 1971, President Richard Nixon met fifteen advisers at Camp David, among them Federal Reserve chairman Arthur Burns, Treasury secretary John Connally and Paul Volcker, then the Treasury’s under secretary for international monetary affairs. On the evening of 15 August he addressed the nation. The gold window was closed: foreign governments could no longer swap their dollars for American gold. The same package froze wages and prices for 90 days and put a 10 percent surcharge on imports.
That cut the last formal link between the world’s main currency and a metal. Since then, dollars, pounds, francs, lire and later euros have been fiat money: units created by central banks and commercial banks, backed by law and by trust in the institutions behind them. How that system works, and what central banks do with the power to create money, is the subject of the next lesson in this path.
Printing without limits: Weimar, Zimbabwe, Venezuela
When a ledger keeper creates units much faster than the economy grows, prices run away. The extreme cases are rare, but well recorded, and they explain why so many earlier systems tried to tie the issuer’s hands.
In Germany, the paper mark collapsed in 1923. At the peak, in November, one US dollar cost about 4.2 trillion marks, the figure the German Bundestag’s own history pages give. From 15 November a new currency, the Rentenmark, took over at one Rentenmark for one trillion paper marks: twelve zeros gone. The British Museum holds a 500 million mark note printed by the Reichsbank that year.
Zimbabwe went further. Its official statistics stopped in 2008, so the peak can only be estimated. The economist Steve Hanke put it at about 89.7 sextillion percent a year in mid-November 2008. In 2009 the country stopped printing its own dollar and used foreign currencies.
Venezuela shows how hard measurement gets. Official data dried up, and figures for 2018 range from tens of thousands of percent to a projection of one million percent by the IMF, depending on who did the counting. On 20 August 2018 the government brought in a “sovereign” bolivar that cut five zeros. Every one of these cases rhymes with Stockholm in 1664: an issuer under pressure prints, and trust breaks.
Cards, SWIFT and the euro: money without paper
While central banks fought inflation, most money quietly stopped being paper. It became entries in bank accounts, which banks create when they lend, and the number of ledgers multiplied.
In the spring of 1950 Frank McNamara, with his partner Ralph Schneider, started Diners Club in New York. According to American Heritage magazine, members paid $3 a year to charge meals at 27 restaurants, and within a year about 200 people carried what the magazine calls “the world’s first multi-use charge card”. A new party now kept a ledger of who owed whom: the card company, sitting between the restaurant, the customer and the bank.
Banks also needed a way to tell each other about those entries across borders. SWIFT says it was formed in 1973 by 239 banks from 15 countries to replace telex, and that 518 institutions in 22 countries were connected when it went live in 1977. It moves messages, not money; the money moves as matching changes in the banks’ own books.
Then Europe merged its ledgers. On 1 January 1999 the euro became the currency of eleven countries, at rates fixed on 31 December 1998 and published by the European Central Bank: one euro equalled 6.55957 French francs and 1,936.27 Italian lire. Euro notes and coins arrived on 1 January 2002, and the franc and the lira were gone from wallets within weeks. Bulgaria became the latest member of the euro area on 1 January 2026. The pound stayed out, and the Bank of England still issues its own notes.
By the end of the century most money was digital, but every digital ledger still had a keeper: a commercial bank, a card company, a central bank. Payments worked because people trusted those keepers. A handful of computer scientists asked whether that trust could be engineered away.
Digital cash was tried before Bitcoin
The first serious attempt came from the cryptographer David Chaum, whose early-1980s work on “blind signatures” showed how a bank could sign digital coins without seeing who spent them. He founded DigiCash in 1989 to sell the idea, and the company went bankrupt in 1998. Chaum’s cash protected the payer’s privacy, but it still needed a bank to issue the coins and to check that none was spent twice.
Others looked for ways to remove the bank. In 1997 Adam Back published Hashcash, an anti-spam scheme: a sender had to do a small, costly computation that anyone could check cheaply. The Hashcash site now describes it as the Bitcoin mining function, and the idea is what we call proof of work.
In 1998 Wei Dai circulated b-money, a proposal for money among anonymous participants. His starting point: “efficient cooperation requires a medium of exchange (money) and a way to enforce contracts.” Nick Szabo described bit gold in a blog post of 29 December 2005, an idea he said he had hit on long before. His diagnosis was that “our money currently depends on trust in a third party for its value”. Neither b-money nor bit gold ever ran as a working network.
Each design solved part of the puzzle. None answered the hardest question in practice: without a central keeper, how do strangers agree on one ledger, so that the same digital coin cannot be spent twice?
Bitcoin: a ledger without a keeper (2008 to 2010)
On Friday 31 October 2008, someone using the name Satoshi Nakamoto posted to a cryptography mailing list. The message opened: “I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.” A few lines down it promised “No mint or other trusted parties.” It linked to a nine-page paper, “Bitcoin: A Peer-to-Peer Electronic Cash System”, whose references include Dai’s b-money and Back’s Hashcash.
The paper’s answer to double spending was to let a network of computers keep the ledger together. Transactions are grouped into blocks, each block is chained to the one before, and adding a block takes proof of work, the same kind of costly but checkable computation Hashcash used. Rewriting history would mean redoing that work faster than the rest of the network combined. New coins appear only as a reward for adding blocks, on a schedule written into the software that halves the reward over time and stops at 21 million bitcoins.
Both powers this lesson has tracked since the Mesopotamian scribes, keeping the ledger and creating units, moved from an institution to a set of public rules. Anyone could read them. Anyone could run them.
The network started on 3 January 2009 with its first block, the genesis block, timestamped 18:15:05 UTC. It holds a single transaction, a reward of 50 bitcoins, and a line of text from a British newspaper: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks“. The headline shows the block could not have been made before that date. It is often read as a comment on the 2008 banking crisis, though Satoshi never explained it that way in any source we checked, and Satoshi’s identity is still unknown.
Bitcoin had no price at first, and no shop took it. On 18 May 2010 a member of the bitcointalk forum posting as laszlo offered 10,000 bitcoins for a couple of pizzas. On 22 May he wrote: “I just want to report that I successfully traded 10,000 bitcoins for pizza.” Fans now mark the date as Bitcoin Pizza Day, often cited as the first documented purchase of a physical good with bitcoin.
Our guide to what Bitcoin is and how it works explains the network in detail, and the Bitcoin coin page shows its live data. Thousands of other networks followed, some copying the design and some changing it; our guide to what a cryptocurrency is covers the wider family.
Stablecoins, El Salvador and the digital euro, as of October 2026
Since 2009 the old questions have come back in three new forms: a private issuer on a blockchain, a state adopting bitcoin, and a central bank building its own digital cash.
Stablecoins bring back an issuer
A stablecoin is a token on a blockchain that aims to hold a steady value, usually one US dollar. The best known, Tether (USDT), launched in 2014 after being announced under the name Realcoin. The blockchain records the transfers, but a company issues the tokens and holds the reserves behind them. In ledger terms that is a step back towards the banknote: a private promise, worth what the issuer’s reserves and honesty are worth. Our guide to how stablecoins work explains the types and their risks.
El Salvador steps back from legal tender
El Salvador’s Legislative Assembly passed a Bitcoin Law in June 2021, and bitcoin became legal tender there on 7 September 2021. The experiment was later scaled back. According to the IMF’s country report of March 2025, a reform removed the concept of currency from the law along with the obligation to accept bitcoin: private businesses may take it if they wish, and a regulation requires taxes to be paid in US dollars. The IMF approved a 40-month programme of about $1.4 billion on 26 February 2025.
On 1 October 2026 the IMF announced it had completed the second and third reviews of that programme, releasing about $138 million. It said no further bitcoin accumulation is planned beyond documented donations, and that majority ownership and control of the government’s Chivo e-wallet has passed to a private operator. Some crypto media still call bitcoin legal tender in El Salvador; the IMF’s documents describe something much narrower.
The digital euro waits for a law
Central banks are building digital money of their own. The European Central Bank describes the digital euro as a digital form of cash, issued by the central bank and available to everyone in the euro area. It aims to be ready for a possible first issuance during 2029, provided the EU legislation is adopted in the course of 2026. In October 2026 that law was still being negotiated. In a written statement on 17 October, ECB president Christine Lagarde said the bank would run a 12-month internal pilot in the second half of 2027, as we reported on the digital euro pilot.
A digital euro would put the oldest kind of modern keeper, the central bank, in charge of a digital ledger that ordinary people use directly. Whether it arrives, and in what form, depends on a vote that has not happened yet.
History of money timeline in one table
Read down the rows and the same pattern repeats: a new ledger appears, someone holds the power to create units, and trust holds or breaks.
| When | Who keeps the ledger | Who can create new units | What went wrong, or could |
|---|---|---|---|
| About 2400 to 2100 BC, Mesopotamia | Temple and palace scribes, on tablets | The administration that sets prices in barley and silver | Records depend on the institution that keeps them |
| From about 1000 BC (China) and after the 1500s (West Africa) | Nobody: shells change hands and are counted | Whoever can gather or import more shells | Supply depends on shipments from far away |
| Yap, before the 20th century | The shared memory of the community | Whoever quarries and ships a new stone from Palau | A disputed memory has no written record to check |
| About 650 BC, Lydia | The coin itself, stamped by the king’s mint | The king’s mint | Electrum could be diluted; later rulers debased coins |
| About 1024, Song China | The state note office | The government | Over-issue; the jiaozi was replaced in 1105 |
| 1661 to 1668, Sweden | Stockholms Banco, then the Riksbank | The bank, lending to the Crown | Too many notes; withdrawn in 1664 |
| 1694, England | The Bank of England | The Bank, linked to state borrowing | Convertibility to gold suspended in wartime |
| 1716 to 1797, France | Law’s bank, then the revolutionary state | The bank, then the Assembly | Collapse in 1720, assignats abandoned in the 1790s |
| 1913 to 1971, United States | The Federal Reserve | The Fed and banks, limited by gold | Gold window closed on 15 August 1971 |
| 1999 to 2002, euro area | The European Central Bank and national central banks | The Eurosystem and commercial banks | One interest rate must suit every member |
| 2009, Bitcoin | Every node that runs the software | Miners, on a fixed schedule capped at 21 million | Rules change only if the network agrees; price swings |
The next lesson in this path picks up where the gold window closed in 1971: how fiat money works today, and what central banks actually do with the power to create it. For the euro area, the date to watch is the 2027 digital euro pilot, if the EU agrees the law it needs in time.
