Hey there mate! This is the second part of this article. If you haven’t read the first part you could click on this link right here to do that, to better understand the second part which you are now viewing.
In the first part of this article, I gave an overview of the history of money; starting from the barter system to gold bullions, coins, bank creation and the use of banknotes. Allow me to continue from where I left off- Central banks.

As previously said, central banks act as a bank for all other banks in a nation, to enable ease of money transfers between banks.
The majority of the money in a nation is kept in a central bank. In the era of coin usage, it made it possible for the government to gain access to this bank of coins. The government would borrow huge amounts of money from the central bank with lower interest rates than any other individual was given, to sponsor its ambitions and foreign affairs (which included wars & extravagant projects) in exchange for IOUs (a document stating that you owe someone, literally “I owe you”). Whenever this happened, most of the gold was made unavailable for depositors to withdraw, hence robbing the depositors of access to their gold coins. Earlier on, I explained that this act is called "fractional reserve banking" and leads to bankruptcy (of banks and their subsequent collapse).

This practice is often unacceptable from individual banks, but the government created a cover for this act for the central bank by passing a decree which suspended the convertibility of banknotes to their gold coin equivalent for a given period. Let me break that down:

If you were to go to the bank with your banknote to convert it back to the initial gold coins you deposited, the conversion will be suspended, saying "no" to it. This was backed by the government and was made to protect the central bank because the central bank didn’t have that money, they gave it as a loan! Yes, that’s a conspiracy. This practice became normalized.


Fiat currency is primarily the kind of paper money we now use; a type of money issued by the decree of the government, with its supply/printing controlled by the government and central bank. Previous forms of money were not printed, gold wasn’t printed rather it was gotten from the earth.

The first form of paper money issued by the government was printed by the Chinese Dynasty around 960-1100AD. It was printed by the ruling dynasty due to the shortage of coins and the supply of the paper currency was strictly controlled by the government. It was described in an essay by Marco Polo- an explorer who traveled to China. In the following centuries, other parts of the world adopted the monetary system of printing currencies.

That was a brief intro of fiat money, now let’s go on with the story:

Though banknotes -which were backed up by the individual’s possession of Gold coins in the bank vault- were primarily used within a nation for trading, when it came to international trading countries couldn’t trust banknotes from another country’s central bank, hence actual gold coins needed to be transported from one nation to another for international trading. Makes sense to me, they’re the ones taking those loans, they sure know better.

Most nations printed fiat (paper currencies) due to the insufficiency of the people using different banknotes from different banks. Hence, the central bank of a nation printed a generalized note (currency) that would be used throughout all banks and will be backed by gold, just like banknotes functioned.

The dollar note was printed in 1914, after the creation of the central bank of the US known as Federal Reserve Bank (Aka the FED); before then the dollar was known as “greenbacks”. This became the generally acceptable banknote (currency) of the US that could be attained when you deposit your gold coins at the bank in the US. Other nations also operated their currencies this way.


When paper currencies attain their value from the store of gold backing them, it is called the gold standard.
At the event of World War II, many countries needed more money to survive the war and their gold supply was little, hence they abandoned the gold standard and went ahead printing currencies that weren’t backed by gold. This led to the devaluing of these currencies as expected. The US supplied weapons and tools for the Allies party during the war and got paid in gold and not the paper currencies of those nations. At the end of World War II, the world returned to the gold standard and the US had more gold in their reserve (central bank) compared to other nations; this gave the dollar currency/notes great value in the market. Hence other nations started buying dollar notes since it had gold backing it up in value (just as a Nigerian would rather trade their naira for the dollar at this point when naira keeps getting devalued in order to store their wealth).

In 1944 a conference was held. This conference was held at Bretton Woods, a place in Hampshire and delegators were present from 44 different countries. This conference was called the National Monetary and Financial Conference. The goal was to create an efficient system of exchange rate for different currencies to maintain peace and growth of economic activity. This led to the creation of two popular institutes: The International Monetary Fund (IMF) and the World Bank. The agreement negotiated at this conference is called the Bretton Woods agreement (named after the location) and it basically deals with exchange rate regulation, while the World Bank served to offer monetary help to nations in distress due to World War II.

The Bretton Woods agreement allowed the central banks of other nations to convert the dollars they kept in their vault for a stated amount of gold coins whenever they needed gold supply, since paper money, like banknotes, were still backed by gold coins. This was called the gold exchange standard (exchanging paper currencies for an amount of gold). This made the US dollar some sort of monetary standard and valued currency. Remember, when something is valuable people will seek it. People sought to acquire dollar notes.

The US government kept printing dollars as the demand from other nations increased due to its value; which was supposed to be backed by a corresponding amount of gold. Soon the US government printed more dollar notes than the amount of gold they possessed in their Reserve.
Remember this same scenario explained earlier, where banks printed more banknotes than the gold they had stored and that led to bankruptcy- looks like the US was headed down the bankruptcy lane; similar scenario, same old mistake.

Let me make it clearer: Due to the Bretton Woods agreement, nations could exchange the dollar note they possessed for gold which was held by the US central bank/reserve, and the US printed these dollar notes. Just like a bank would give out more banknotes than the gold they had, the US printed more dollars than the gold they possessed, hence they did not have enough gold to back up the supply of dollars in circulation. This is why popular financial experts/investors like Robert Kiyosaki describe the dollar as debt-based money. This was similar to bankruptcy.

The US dollar was about to lose its true value being the availability of gold backing it up.
To save the US economy from this crisis, President Richard Nikon in 1971 took off the gold standard from the dollar temporarily. Yeah, I’ll explain: gold and dollar went hand in hand. Gold-backed up the value of the dollar. President Nikon temporarily broke the dependence of the dollar on gold, allowing the dollar to stand on its own as money and this became permanent. The convertibility of the dollar to gold was suspended. There was no need to worry about the lack of gold to back up the excess dollar printed into circulation. Much later, the US government placed an order for its citizens to hand over their gold (coins) for $20.67 per troy ounce. The dollar note was then the general currency of the US.

This started a new era, where money lost control over its scarcity. Gold couldn’t be printed but paper could; fiat money could be printed. The more you print, the more you supply and the more the value is reduced. This is explained as inflation and devalues the currency and escalates the prices of goods and services; take a look at the naira currency.
Soon this became a norm and other currencies went off the gold standard. To date, paper money; fiat money is what we use until the evolution of cryptocurrencies- one whose principle returns the lost glory of money. Yes!


Cryptocurrencies as explained in our older articles (here) is a digital valuable asset created on the blockchain.
Bitcoin is the first cryptocurrency initiated to create a form of money that could be controlled outside centralized financial authorities. That is, so I can send and receive money from you mate, without using a bank or any financial company.
Over the years we’ve watched the cryptocurrencies rise in value and truly act as money. You may wonder, what about some computer invisible nonsense, or better still, scam scheme qualifies it as money? And I would reply by saying, tell me the properties of money (mentioned in the first part of this article). Tell me!

For any object to function as money, a community of people simply need to believe it is valuable, use it for trading and convince people outside this community of its value to them. Money is a matter of willingness to accept an object in exchange for a good/service. It’s valuable because you believe it to be. People on the Bitcoin network believe it was valuable, hence they kept using it and when people perceived the value, they generally started desiring to be part of it.

“Money should be a reward for work, money gotten without work (adding value) is theft…”

Gold was not just picked up, it had to be dug from deep grounds, it had to be refined, men had to work, therefore it was a reward. Bitcoin doesn’t just appear, Bitcoins are digital rewards given to miners (computer nodes that help run the network) when they solve difficult computational puzzles that require an increasing amount of computational power supply and massive input of electricity, again, this is hard work and resource input, hence bitcoin is a perceived valuable reward people are willing to believe in.

Listen, the most mind-blowing property of bitcoin that qualified it as money is its scarce nature similar to gold it even better. There will only be 21 million bitcoins in existence, never more than that.

Because fiat currency is not backed by gold, it can easily be printed by the government and central bank. When this printing activity exceeds reasonability there becomes too much of that currency in circulation leading to inflation. More units of that currency will be needed to purchase goods and services, the currency becomes devalued and those saving that currency lose value on their savings which is heartbreaking, I speak from experience. This is usually followed by increasing taxes; the government benefits, alongside those corporations closer to the money supply while the masses get poorer. Most times this undisciplined money printing is intended for their relative interest and not for the community. How sad!
The supply of cryptocurrencies like Bitcoin is not controlled by a central body hence its supply cannot be manipulated outside its programming.

The birth of cryptocurrencies can be seen as the restoration of how money was intended to work; the integrity and morality of money. The form of money used by a nation determines its success and growth- remember King Croesus and his wealth? The kingdom of Lydia was able to rise due to their monetary system of gold and silver coins.

The form of money we use can stimulate immoral behaviours which becomes immoral systems and destroys the development of that nation, look at how bribery and corruption in all sectors of Nigeria have become a norm hence disrupting civilization.

We must embrace change.

Bitcoin as beautiful as it is faces some shortcomings, which the next generation of blockchain technology solves. Wanna know what that is? Come back on Thursday for that.

Come quench your crypto thirst in ZOEPOOL.

Ticker: ZOE
Follow us on Twitter Instagram

Join our Telegram group chat here https://t.me/joinchat/HIH_E2mxQyw1MjM0

A place where #WomenInBlockchain are cherished.