Before money existed, people used the barter system — trading goods directly with each other.
Imagine you have fish but need bread. You must find someone who has bread AND wants fish. This was called the double coincidence of wants — and it made trading very difficult.
Money solved this problem by becoming a universal medium of exchange — something everyone accepts as payment.
For anything to work as money it must have these properties:
1. Accepted by everyone
People must trust and accept it as payment.
2. Scarce
If anyone could create unlimited money — it would be worthless. Gold was used for centuries because it is naturally scarce.
3. Divisible
You can split it into smaller units. $1 can become 100 cents.
4. Durable
It must last over time without rotting or breaking.
5. Portable
Easy to carry and transfer.
Today’s money — dollars, euros, pounds — is called fiat money. It has value because governments say it does — not because it’s backed by gold or anything physical.
This means governments can print unlimited amounts of it. When too much money is printed — prices rise. This is called inflation.
In 2008 during the financial crisis — banks created so much money that the entire global financial system nearly collapsed.
This is exactly why Bitcoin was created.
Cryptocurrency is a new form of money that:
Bitcoin was the first cryptocurrency — created in 2009 as a response to the 2008 financial crisis.
In the next topic we will learn exactly how Bitcoin works.