Thread by @yb_effect

[2/365: The Rise of Money]

1/ Money is taken for granted today, but have you ever stopped to think about why we need money? The answer seems so simple, yet few are able to explain the reasoning. Let’s discuss how the inefficiencies of bartering led to the rise of money. 🧵

2/ In grade school, lunch time in the cafeteria would be like a trading floor on Wall St. I would give my friend a Cheeto in return for a Dorito. Others were trading Oreos for Cheez-Its. The possibilities were endless and the times were crazy!

3/ Those moments demonstrate what bartering is: the direct exchange of commodities. Notice how I got exactly what I wanted (i.e. Dorito) and my friend got exactly what she wanted (i.e. Cheeto). There was no money involved and we were both happy! So why don’t we do this today?

4/ In the above example, for the chip trades to happen, both parties had exactly what the other wanted - a situation known as the Double Coincidence of Wants. But now let’s ask ourselves, how often does this actually happen?

5/ Let’s say one day at school I was in a bad mood and didn’t want a Dorito but my friend still wanted a Cheeto. She had two options: find something else I would trade for a Cheeto or trade with someone else. And if those two options didn’t work out...no Cheeto for her!

6/ And that right there is the limitation of the bartering economy: both parties must have exactly what the other wants or else the trade collapses. The chances of both people having and willing to trade at the right time and place is literally a coincidence.

7/ If humans never solved this problem, we would be nowhere near how advanced we are today. Think about it...there would be no specialization. Everyone would be simply trying to live and support their families in the most hunter-gatherer way possible.

8/ There’s a low chance doctors can grow their own food and teachers can build their own houses. That’s why mastery & specialization in a craft is essential to keeping this world advancing at exponential rates. We should all be doing what we’re “good” and passionate about.

9/ So, how does a teacher trade for tomatoes? Or a doctor trade for shoes? Yep, that’s exactly where money rises. Money acts as a medium of exchange for trades to happen. With money, there’s no need for the involved parties to both need something at the same time.

10/ Remember that money doesn’t have to be Dollars or Euros. Money is any unit that is generally recognized as a medium of exchange by a group of people. Today, we acknowledge those mediums as gov. currencies, but in the past they were in fact items like shells, metals, etc.

11/ Most of us are in a mindset that money is only the USD and that the government controls it. That’s far from the truth - in fact, the USD really just became ubiquitous in the last 100 years. Money is literally technology...constantly evolving to a better version (*cue* #btc).

12/ This thread may have seemed straight-forward and basic, but until you don’t think about the origins of money, understanding it’s utility, properties, and future will always be a difficult task. The fundamentals are absolutely essential.

13/ Source and inspiration for this thread comes from “The Origins of Money” section of @hosseeb article “A Brief History of Money”.

nakamoto.com/a-brief-histor…

14/ If you liked this thread, please take a second to follow me! I enjoy teaching crypto and decentralization concepts through twitter threads. DMs are always open as well!