Money and its functions

Additional Resources
CFI is the official provider of the Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to transform anyone into a world-class financial analyst.
In order to help you become a world-class financial analyst and advance your career to your fullest potential, these additional resources will be very helpful:

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  Bitcoin
  
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  Cryptocurrency
  
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  Financial Assets
  
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  How the Government Makes Money
  

What is Currency?
Currency refers to money, that which is used as a medium of exchange for goods and services in an economy. Before the concept of currency was introduced, goods and services were exchanged for other goods and services under the barter system. Bartering made it quite difficult to accurately determine the value of any given good or service or track the evolution in the value of a good/service over the course of time. The development of money as a medium of exchange created a much more efficient economy.

By placing a single, monetary value on a good/service, it became much easier to determine its relative value. Currency, thus, became widely used across the globe and facilitated trade between nations.

Origin of Currency
The first usage of currency can be traced back to ancient Egypt. During that time, money was used as a form of receipt that represented an individual’s right to claim grain. It was the first time that currency was utilized as a store of value that was backed by some kind of an asset (in this case, grain).
Fundamentally, the store of value was what provided money with a significant advantage over the barter system. Currency’s value was considered stable because it was created and backed by some governmental authority. This meant that it became much more difficult for individuals to manipulate the value of their goods or services, and it became easier to arrive at a consensus around the value of a good or service.
Various bills and coins introduced as established representations of stores of value that were backed by the government. Each country developed its own currency in accord with the cost of living and standard of living in their respective domains.