In the previous chapter, we discussed the Double Coincidence of Wants problem, where the ultimate solution was "money" acting as an intermediary. But what did the world's very first money actually look like? Did it have a hero's face printed on it??
Back in ancient Roman times, a ration of salt was given to Roman soldiers as payment because it was highly valuable for preserving meat. In fact, the word "salary" itself originates from the Latin word 'Salarium'. Long before paper money or coins existed, humans used everyday items that were considered valuable by everyone in a community (this is called commodity money). At a glance, it still felt quite similar to an evolved barter system.
Examples of this commodity money included cowrie shells, cocoa beans, wheat, livestock, and of course, salt.
However, commodity money at that time had several issues that needed to be solved.
First, the "money" of that era lacked good durability: salt dissolves when exposed to water, wheat can rot, cocoa beans can't be stored for too long, and so on.
Another problem with commodity money was portability. For instance, if you wanted to buy a plot of land using 10,000 cowrie shells, it was simply too heavy and far too much of a hassle to carry around back then.
And what about the standardization of commodity money? Take a cow, for example. Cows come in different sizes—does a fat cow have the same value as a skinny one? It’s a simple problem that caused endless debates between buyers and sellers. I mean, you can't exactly chop a cow in half just to buy something cheaper, right?
Because organic commodities were deemed inefficient, humans slowly shifted to precious metals like gold and silver as currency. The question is: why? Simply put, gold solved all the problems of the previous commodity money system. Gold is highly durable (it doesn't rust), it's easily divisible by melting it down into smaller sizes, and most importantly, gold and silver are scarce. They have to be mined, requiring massive amounts of energy and labor to obtain, which keeps their value intact.
In its early days, humanity used gold in simple forms—like little nuggets or fragments. This meant that every time someone bought something, they had to weigh it first. The solution? The ruling kings of that era began melting the gold down into coins with standardized sizes and weights, stamping them with the king's face and a number (what we call minting in blockchain terminology).
This royal stamp became the standardization of exchange value.
For example: one gold coin stamped with the logo of a Javanese King = 1. Every single coin bearing that stamp would hold the exact same value. Thanks to that stamp, the economy became highly efficient.
So, where exactly does this connect to blockchain and crypto?
1. Bitcoin is Digital Gold (Digital Commodity Money)
Similar to gold, Bitcoin has a property of scarcity, hard-capped at exactly 21 million coins. Bitcoin also requires a massive amount of energy to be "mined" through the Proof of Work algorithm.
The difference is that Bitcoin has completely solved gold's portability problem. Shipping 1 ton of gold to another island requires a ship and fully armed escorts so it doesn't get hijacked. Meanwhile, sending Bitcoin equivalent to 1 ton of gold from the tip of Island A to the tip of Island Z only takes about 10 minutes and an internet connection (which doesn't even have to be that fast).
2. Standardization without the "King's Stamp" (Decentralization)
In ancient times, the value of gold coins was protected by a centralized authority: the ruler. But in Bitcoin, there is "no king," and all entities are equal. The standardization of the amount and authenticity of Bitcoin is not determined by humans, but rather by Mathematics, Cryptography, and computer Nodes.
After the explanation above, we can understand that the history of metal coins is crucial to grasping the reasoning behind Bitcoin's creation. At its core, Bitcoin is humanity's attempt to return to the principles of "scarce" and "standardized" commodity money, but this time, in a purely digital format.
Thank youuu for reading until the end!