Before the world completely embraces a digital economy, perhaps we should take a step back to see how well cash has served humanity over the years and continues to do so.   

The concept of money as a medium of exchange has been central to the development of modern economies. 

Before cash came along, we had simple barter systems, where one thing was exchanged for another. That was fine for subsistence living in small communities, but it broke down as people began to discover there was a big, wide world out there and that complicated trade could only be facilitated by using something of agreed value.  

According to the Greek historian Herodotus, the use of coins began around 600 BC. Although other civilisations exchanged tokens, the Lydians of Asia Minor (modern Turkey) are credited with creating the first standardised coins. 

These early coins were made of electrum, a natural alloy of gold and silver, and were stamped to verify their authenticity. This innovation allowed for more complex economic activities than simple barter and led to the expansion of trade. 

Coins offered several advantages over their predecessors: they were portable, durable, and had intrinsic value due to their metal content. Additionally, coins allowed for standardised trade and contributed to the development of more sophisticated financial systems. 

This, in turn, enabled the accumulation of wealth by individuals and the expansion of empires. 

These early coins, often adorned with portraits of the rich and powerful of the day, have also become a valuable resource for historians and archaeologists.  

While coins facilitated trade on a local and regional scale, the introduction of banknotes in Tang-dynasty China (7th Centry AD) represented a revolutionary leap forward. 

Initially, these were issued by merchants as promissory notes but were later adopted by governments, leading to the first state-backed paper money. 

The convenience of banknotes quickly became apparent. They were lighter, easier to transport in large quantities, and could be produced in vast amounts without the limitations imposed by coins and metal bars. 

But the concept took its time to move from East to West. 

It wasn’t until the Renaissance (1400-1650AD), when explorers and traders returned home with tales of this novel form of currency, that notes began to take hold in Europe. 

The supremacy of banknotes began with the emergence of central banks, such as the Bank of England in 1694, which issued paper money backed by the promise to pay the bearer a specific amount of gold or silver. 

The introduction of coins and banknotes had profound impacts on economic systems and was instrumental in the development of modern capitalism. 

These forms of money provided a reliable means of exchanging value, which was crucial for the growth of international trade. They also allowed for the creation of complex financial instruments and institutions, including bank savings accounts, loans, and credit facilities. 

Until relatively recently (1971 in the United States), the “gold standard” operated, where the government would only issue notes and coins to the value of the gold it held in reserve. 

Readers may remember the plot of the James Bond film, Goldfinger, where the eponymous villain planned to gain control of the global economy by contaminating the American gold reserves at Fort Knox.  

The shift from commodity money (like coins with an intrinsic value) to fiat money (like banknotes backed by government decree) facilitated greater control over national economies. 

It allowed governments to influence economic activity through monetary policy, including the manipulation of interest rates and control over the money supply.