Timeline of Digital Money

The Natural Evolvement of Money in the Digital Age

Money has taken many forms through the ages: shells, wheels, beads, and even cows. All forms, though, have always had four features in common. We've talked about them in the previous section:

• A medium of exchange

• A unit of account

• A store of value

• A standard of deferred payment

These features are the backbone of money. Feature enhancements have been applied to these core features in the millenniums of time, such as:

• Durability

• Portability

• Divisibility

• Uniformity

• Limited supply

• Acceptability

All the feature enhancements happened in an asynchronous manner, in multiple continents across multiple geographics, societies, and economies. Before the digital age, most of these enhancements are achieved in silos, however.

Grasping the value proposition of Cashless can be difficult. For starters, it takes time for laymen to understand how a currency that lives in the virtual realm can have any real-world value. "Seeing is believing," and so many have a hard time dissociating the idea of money and the physical manifestation of money. Ask a child "What is money?" and you’re likely to receive a range of answers, many of which reference something physical. Coins, notes, banks, and credit cards are some of the words your young friend might use. Many adults would give a similar response. But there is so much more to money than meets the eye. Throughout history, money has evolved time and again, becoming more abstract in the process. Following this history can give us some perspective on the true nature of money and how Cashless ushers in the next phase in the evolution of money.

Therefore, the illustration of the Timeline of Digital Money needs to unfold all the way back from the beginning of The Evolution of Money.

6000 B.C. - Bartering

An act of trading goods or services between two or more parties without the use of a medium of exchange.

1000 B.C. - Physical Objects

The advent of the concept of money, represented by any type of physical objects, such as: precious metals, salt, tea bricks, and even cigarette.

806 - Paper Money

A country's official paper currency. It is circulated for the transactions involved in acquiring goods and services. The printing of paper money is typically regulated by a country's central bank or treasury in order to keep the flow of funds in line with monetary policy.

1871 - Gold Standard

Gold is a physical object with a long trading history. But the gold standard was only established in 1821, and England became the first country to officially adopt a gold standard.

The century's dramatic increase in global trade and production brought large discoveries of gold, which helped the gold standard remain intact well into the next century. As all trade imbalances between nations were settled with gold, governments had a strong incentive to stockpile gold for more difficult times. The international gold standard emerged in 1871, following its adoption by Germany. By 1900, the majority of the developed nations were linked to the gold standard.

The gold standard is a monetary system where a country's currency or paper money has a value directly linked to gold. With the gold standard, countries agreed to convert paper money into a fixed amount of gold. A country that uses the gold standard sets a fixed price for gold and buys and sells gold at that price. That fixed price is used to determine the value of the currency. For example, if the government sets the price of gold at $500 an ounce, the value of the dollar would be 1/500th of an ounce of gold.

1950 - Credit Cards

The journey of money evolves from heavy physical objects, to light-weight paper money, and at this point became an invisible object. Credit card payment is a leapfrog in terms of money transformation. It's where the cashless payment came alive, which introduces tremendous convivence to monetary transactions.

After Diners Club issued its first charge card in 1950, the payment card began evolving into what we know as the credit card today. In 1958, American Express Company jumped into the payment card scene and launched its first charge card.

In 1958, Bank of America launched BankAmericard. This paper card could be considered the first modern credit card. The BankAmericard came with a $300 limit and was the first credit card to offer revolving credit, which gave people the ability to carry a balance. In 1970, BankAmericard was spun off into National BankAmericard, Incorporated, an interbank card association that issued and managed credit cards. In 1976, National BankAmericard, Inc. became Visa.

In 1979, Mastercard was formed. Before it was called Mastercard, the company was formed as The Interbank Card Association in 1967. It then rebranded itself as Master Charge in 1968 before its final change in 1979. And finally, the Discover Card, which was launched nationally in 1986 by Dean Witter Financial Services Group, Inc. which was a subsidiary of Sears.

Credit cards didn’t always have magnetic strips or EMV chips. Before magnetic strips, machines would take imprints of credit cards to capture the information needed to process payments. The copy would be sent to a processing center where a clerk could enter a person’s credit card account information into a computing system. In 1969, IBM helped develop a standard for magnetic strips that would eventually be adopted internationally. This standard allowed credit cards to use magnetic strips to transmit card information worldwide.

Until recently, magnetic strips were the most common way of storing and transmitting card information. A new technology, called the EMV chip, aimed to make credit card transactions more secure. These chips generate unique, one-time codes to approve transactions and are considered more secure than static magnetic strip information. In 2015, the EMV chips become standard to help protect buyers against fraudulent card transactions.

1994 - Digital Payment

The introduction of the internet opened up a realm of opportunities that had never been dreamed of before. The launch of ARPANET back in 1966 laid the technical foundation for the internet as we know it today. While the platform existed in the mid-1960s, it was not until the late 1980s we started truly noticing the internet’s potential. In 1989, Tim Berners-Lee devised a system of pages and sites which could be connected by hyperlinks, effectively paving the way for the realization of digital payments.

The Stanford Federal Credit Union is credited as the first organization to offer their clients a digital payment system, having first done so in 1994. Legend has it that the first-ever digital purchase was a pizza from Pizza Hut. Several corporations soon followed suit, with digital payment giants Millicent and Ecash launching in 1995 and 1996 respectively. These corporations specialized in supplying electronic cash alternatives, such as digital cash, e-money, and tokens.

In 1998, Elon Musk, Peter Thiel, Ken Howery, and several other investors founded a company called PayPal. PayPal, considered to be one of the first companies to specialize in digital payment systems, became a game-changer in the digital payment environment. The company’s system became wildly popular with eBay users, the e-commerce auction firm.

In a similar fashion, Alipay was launched in 2004 by Alibaba Group and its founder Jack Ma, to facilitate e-commerce payments. It is China's leading third-party digital payment solution, providing an easy, safe, and secure way for millions of individuals and businesses to make and receive payments on the Internet. The digital payment market sprang up with numerous newcomers entering the space, ever since.

Until this point, the backbone of digital payment is still the legal tender: the national currency of every country. It is recognized by law as a means to settle a public or private debt or meet a financial obligation. The digital payment is still a combination of technological and regulatory innovations.

2009 - Cryptocurrency

A cryptocurrency, crypto-currency, crypto, or coin is any form of currency that exists digitally or virtually and uses cryptography to secure transactions through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it. It uses blockchain the decentralized system to record transactions and issue new units.

The first cryptocurrency Bitcoin was created out of the turmoil of the 2008 Great Recession as distrust of banks and their role in the financial system grew. An individual or a group of people going by the name Satoshi Nakamoto issued a white paper to address the centralized control of money and the trust required in handling citizens' cash.

In the traditional financial system, transactions can be reversed or meddled with by third parties, and transaction costs can add up. Bitcoin was presented as a way to transact without using a third party. Rather, the Bitcoin system uses cryptographic proof to maintain the integrity of the network instead of relying on third-party banks and other institutions. It means people can send money directly to one another without a bank or third party as an intermediary. On Jan. 3, 2009, the Bitcoin blockchain was launched when the first block, called the genesis block, was mined. The first test transaction took place about one week later.

As an alternative form of digital payment, Bitcoin has taken its currency owner and the world for quite the ride from its humble beginnings in 2008 to the 2021 price peak. In just over a decade, the first cryptocurrency has spiked and crashed and rallied and fallen again, over and over, on the way to a price in the tens of thousands. It has always been volatile, and it's the main reason why both individuals and businesses haven't adopted this financial instrument for daily payment usage on a large scale.

Nevertheless, including all the successors of Bitcoin, the underlying technology blockchain introduces a brand-new solution to enhance the capability of money on the four core features. Along with all the disadvantages of Bitcoin, such as: high energy consumption, and use in criminal activities, price volatility is just a well-defined user problem to tackle.

2020 - Central Bank Digital Currency

Central bank digital currencies are digital tokens, similar to cryptocurrency, issued by a central bank. They are pegged to the value of that country's fiat currency.

The Bahamas Sand Dollar is the first and also the most advanced central bank digital currency in the world. The Sand Dollar came to prominence as a solution to the transaction difficulties the country faced when it was hit by hurricane Dorian in 2019. The storm battered the Island country, leaving most of its inhabitants without electricity. As government aid trickled down, many were desperate for help. Those who had money in banks couldn’t get cash or rely on the physical or electronic banking infrastructure.

According to a report, officials from the Central Bank of Bahamas often refer to the trauma of hurricane Dorian as one of the biggest advantages of the country’s pioneer launch of the Sand Dollar. Apart from being a means to digitally store money directly at central banks and using anywhere, Sand Dollar does not rely on internet connections for payment transfers as it can be authenticated on the device via token technology, making it very convenient as a payment and storage method even when banks are not accessible – as in the days and weeks after Dorian.

“After Hurricane Dorian in 2019, it took banks more than a year to get their branch facilities restored. There are one or two banks that are still in the process of getting back to the state they were in,” said John Rolle, Governor of the Central Bank of Bahamas.

The Sand Dollar was built with a clear set of objectives including building speed, efficiency, and security in payments; cutting costs of financial services and building inclusion across age and status; and tightening up control on money laundering, counterfeiting, and other cash-enabled fraud.

After a successful 2019 pilot on the island conglomeration of Exuma which reflects the configuration of the Bahamas; the Sand Dollar was launched on Oct 20, 2020. There're over 300,000 Sand Dollars in circulation used by over 20,000 people in the island country with a population of 399,826.