1.1 Evolution of Money & Payments
What you'll learn: How money evolved from physical coins to digital systems, setting the stage for stablecoins.
The story of money is a story of solving problems. Each major innovation in the timeline below emerged because existing systems couldn't meet society's evolving needs. As trade expanded beyond villages, we needed standardized coins. As commerce grew beyond physical meetings, we needed ways to send value across distances. Today, as our world operates 24/7 across borders, we need money that can keep pace. This timeline shows how each breakthrough built upon the last, ultimately leading to the conditions that made stablecoins both necessary and possible.
550 BC
First standardized coins (Lydia)
Coin
618 AD
Paper money (Tang Dynasty, China)
Paper note
1871
Western Union electronic transfers
Telegraph/lightning bolt
1950
Diners Club card
Credit card
1973
SWIFT standardized messaging
Globe with arrows
1998
PayPal launch
@ symbol or email icon
2007
M-Pesa (Kenya)
Mobile phone
2008
Alipay/WeChat Pay era begins
QR code
2009
Bitcoin introduced
Digital coin/blockchain
2016
India UPI launch
Rupee symbol with arrows
2016
Brazil Pix
Brazilian flag with instant symbol
2023
FedNow (US)
Dollar with clock/instant symbol
Money has always evolved to solve the problems of its time. Each breakthrough, from standardized coins to instant digital payments, has made exchanging value easier, faster, and more accessible. Understanding this 3,000-year journey helps explain why stablecoins matter: they represent the next logical step in money's evolution.
The first standardized coins emerged in 550 BC in Lydia (modern-day Turkey), using electrum, a naturally occurring gold and silver alloy, to create uniform units of exchange. This innovation solved the inefficiencies of barter systems and variable-weight precious metals, establishing the foundation for organized commerce. By 618 AD, China's Tang Dynasty had invented paper money, introducing the new concept that currency could represent value rather than contain it intrinsically [1].
The industrial revolution accelerated payment innovation through telecommunications infrastructure. Western Union launched the first electronic money transfer service in 1871, enabling near-instantaneous value movement across vast distances [2]. The 1950 Diners Club card, created after Frank McNamara forgot his wallet at a New York restaurant, introduced credit-based payments, separating the act of purchase from immediate settlement [1]. By 1973, SWIFT established standardized messaging for international wire transfers, though settlement still required multiple days and correspondent banking relationships.
The internet era brought radical payment democratization. PayPal's 1998 launch enabled anyone with an email address to send money globally, reaching 100 million users by 2005 [3]. Kenya's M-Pesa, launched in 2007, achieved even more impressive success by bringing financial services to the unbanked through basic mobile phones. Within a decade, M-Pesa processed transactions worth 59% of Kenya's GDP in 2023 [6], proving that leap-frogging traditional banking infrastructure was possible. While Kenya led mobile-first finance for the unbanked, China demonstrated how integrated digital ecosystems could transform existing commerce. Meanwhile, China's Alipay and WeChat Pay grew from e-commerce tools to complete financial ecosystems processing $80 trillion annually by 2024 [4].
Real-time payment rails represent the immediate precursor to stablecoins, establishing instant settlement as the new standard. India's Unified Payments Interface (UPI), launched in 2016, now processes 18.67 billion monthly transactions worth $293 billion, making India responsible for 46% of global instant payments [5]. Brazil's Pix achieved similar success with 63.4 billion transactions in 2024 across 168 million users [7, 8]. The US Federal Reserve launched FedNow in July 2023, enabling 24/7/365 instant settlement between financial institutions [9].
Yet these regional successes revealed a critical limitation: they operate as isolated islands. M-Pesa users can't send money to Brazil's Pix network. UPI doesn't connect with FedNow. Each system works brilliantly within its borders but fails at the increasingly common need for truly global transactions. This fragmentation, combined with continued reliance on traditional banking infrastructure, created an opening for a radically different approach.
Bitcoin's 2009 launch introduced a radical departure from state-controlled money: a decentralized digital currency operating without central authorities. While Bitcoin proved that peer-to-peer electronic cash was technically feasible, its extreme price volatility (rising from under $1 to peaks above $107,000 as of June 2025) made it impractical for everyday transactions. This volatility gap created the market need for stablecoins: digital currencies combining blockchain's technical advantages with price stability, enabling the programmable money applications that traditional payment rails cannot support.
But even instant payment systems like UPI and Pix have limitations: they only work within their own countries, require bank accounts, and can't be programmed with automatic rules. Traditional systems process payments, but they can't hold instructions like 'release payment only when goods arrive' or 'automatically split this payment among five suppliers.'
This concept of programmable money represents a fundamental shift. Imagine money that can execute business logic automatically: escrow payments that release upon delivery confirmation, subscriptions that charge only when services are used, or international trades that settle instantly when conditions are met. This programmability, combined with global accessibility and 24/7 operation, creates possibilities that traditional payment rails cannot support.
For example, a stablecoin-based escrow could automatically release payment when shipping data confirms delivery. No intermediary needed. A supply chain payment could split funds among five suppliers the moment an invoice is validated. No manual reconciliation. These are programmable settlement capabilities that traditional rails cannot provide.
These technological advances have created a new challenge: how do we classify and understand the different types of digital money emerging today? Just as traditional finance distinguishes between cash, checks, and securities, the digital realm has developed its own categories. Understanding these distinctions is crucial for grasping where stablecoins fit in the broader digital money ecosystem.
Key Takeaways:
Money innovations solve specific problems (barter → coins, distance → electronic transfers, speed → instant payments)
Digital payment adoption varies by region based on local needs (M-Pesa in Kenya, UPI in India, Alipay in China)
Bitcoin proved digital currencies could work but volatility limited practical use
Modern instant payment systems still have limitations that stablecoins address
References
[1] Square - "History of Money and Payments" - https://squareup.com/us/en/townsquare/history-of-money-and-payments
[2] Argoz Consultants - "The Evolution of Payment Systems" - https://argozconsultants.com/blog/the-evolution-of-payment-systems/
[3] World Bank - "Financial Inclusion in Sub-Saharan Africa" - https://www.worldbank.org/en/publication/globalfindex/brief/financial-inclusion-in-sub-saharan-africa-overview
[4] Mobile Payment in China – Statistics and Trends - https://www.go-globe.com/mobile-payment-in-china-statistics-and-trends-infographic/
[5] UPI clocks new record in value and volume in March after dip in Feb - https://www.business-standard.com/finance/news/upi-value-hits-record-rs-24-77-trillion-in-march-marks-new-high-in-fy25-125040100744_1.html
[6] M-PESA: Why The World’s First Large Mobile Payment Platform Keeps On Winning - https://www.forbes.com/sites/christianstadler/2024/06/11/m-pesa-why-the-worlds-first-large-mobile-payment-platform-keeps-on-winning/
[7] Pix in Brazil: What to Expect in 2025 and beyond - https://paymentscmi.com/insights/pix-in-brazil-latest-statistics-central-bank/
[8] Ultimate Guide to PIX - https://conduitpay.com/guides/ultimate-guide-to-pix
[9] Federal Reserve - "FedNow Service" - https://www.federalreserve.gov/paymentsystems/fednow_about.htm
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