These first coins were made of electrum, an alloy of silver and gold. People have been trading precious metals for as long as humans have been around, but the first known commodity currencies based on precious metals dates back to Ancient Greece in the 6th or 5th century BCE. Precious metals such as gold, silver, and platinum have often been used as commodity currencies because they are relatively easy to store/transport and they will not spoil like perishable goods such as wheat, tobacco, or barley. The acceptance of a common commodity of exchange allowed people more freedom and flexibility when exchanging goods. There is evidence of commodity currencies dating back to ancient Mesopotamia and Egypt, but the practice likely existed before then.Īccording to some historians and anthropologists, commodity money evolved out of a bartering system when participants agreed to accept a common medium of exchange to facilitate transactions of goods and services. History of Commodity MoneyĪs with many things economic, it is not entirely clear exactly when humans started to use forms of commodity money. The key feature of fiat money is that fiat money has value only because the government maintains that value. The coins and banknotes we carry around are not valuable in themselves, but their value derives from the stability of the government. Most forms of money in modern economies are fiat currency and have no value in themselves. Fiat money obtains its value simply because the government legislates and regulates the use of it. What Is Fiat Money?įiat money, in contrast, is any money that is issued by a government and not backed by any physical commodity. The value of commodity money is perceived directly by the user, who recognizes the utility or beauty of the token as valuable in itself. Most forms of money throughout human history have been commodity monies. Some examples of commodity money used throughout history have been salt, gold, cryptocurrency, copper, tea, shark teeth, cocoa beans, tobacco, barley, and large stones. Commodity money, in short, is any money that gains its value primarily in virtue of the substance the money is made of, or the potential use of the money.
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