Explain the different phases of currency development

Anything that is acceptable as a medium of exchange and even the means of payment for the settlement of debts can be considered as money. In today's world, money consists of currency notes and coins. The money as we see today has been the result of a long evolution process. The main steps through which money progressed are:

Barter system

It involves the exchange of commodities. In the system, commodities were exchanged for commodities. But such a system required the fulfillment of double coincidence of want. Every person had to find a buyer who was ready to buy their commodity and in exchange sell the particular commodity that they needed. It was the greatest difficulty of the barter system. Also in a barter system, there was no measuring rod for measuring the value of money. This money could not be used as a store of value or for future payments. These serious inconveniences of barter led to the introduction of commodity money.

Commodity money

It is the next stage of the barter system. In the financial system, commodities were exchanged as money. Some standard commodities like shells, fur, utensils, weapons, and grains were considered money. The commodities that acted like money was decided upon the mutual consent of the parties involved in the transaction. Thus the system of exchange where defied commodities began to be exchanged as money was known as the commodity system. But it also had many inconveniences like problems in deciding the commodities that acted as money and their uses. Here also money failed to provide a standard for measuring value. These problems paved the way for the development of metallic money.

Metallic money

In this system, metals such as copper, bronze, gold, and others were considered money. It offered the users a lot of advantages in terms of ease of handling and certainty in the amount of transaction. It provided a standard unit of measuring value. With the passage of time, precious metals like gold, silver, and others began to be considered as money. Many kings started minting coins in their names that were circulated among the public to be used as money.

Paper money

This is the modern form of money that is being used across the world. The precious metals and coins were inconvenient to be carried in large quantities. In place of this paper currency was introduced that gave the convenience of the transaction to the users. They could carry large amounts in the form of currency notes. In the modern currency system, the notes are issued by the central bank that is the apex monetary authority of the country. No one has the authority to reject the money that is being circulated by the central bank. Thus this became the most convenient method of conducting transactions and exchanges.

Plastic money and e-money

This developed with the development of internet facilities. Plastic money consists of debit cards, credit cards, and other facilities. The users can carry them instead of carrying currency. A debit card allows the user to withdraw money from the account while credit card allows the user to overdraw beyond the account holder's balances. The expansion of the internet has also paved the way for the development of e-wallets like PayTm, Google Pay and other services through which transactions can be carried out.

Thus the evolution of money has different stages from the past till now. Still, money is in the process of evolution with the changes in the needs and requirements of the people.