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September 13, 2023

The Evolution of Modern Banking: A Journey from Gold to Digital Currencies

Finance Cryptocurrency
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Modern banking has come a long way from having gold-backed currencies to dealing with innovative digital currencies. How exactly did we get here, and what do these currencies mean to us today? Let’s take a look at the journey to gain a better understanding, answering these questions along the way.

When currencies were strictly backed by gold, it was referred to as ‘The Gold Standard’. Under this standard, an entire country’s supply of currency was directly linked to the value of gold assets. This system unraveled when a crisis struck during the Great Depression. Banks failed, and people ran to exchange their paper money for gold. Major countries quickly pulled out of the system to avoid running out of gold. England dropped the gold standards in 1931, and the United States followed shortly thereafter in 1933.

That’s when fiat money came on the scene. The Gold Standard was effectively replaced by fiat money in 1971 after the United States administration stopped the direct convertibility of USD to gold. The term ‘Fiat’ in itself means that the currency is used by citizens as a result of a government order, and must be accepted as a means of payment - no matter what it’s backed by. Essentially, the US dollar is backed by trust in the US government, making it a fiat currency.

There are benefits to fiat currency that couldn’t be achieved with gold-backed currency. Namely, the amount of money in circulation can be directly correlated to economic conditions, providing a possible response in times of crisis. You don’t have to mine for gold in order to print more money.

On the notion of trust, checks were developed, allowing banks to handle more convenient and time-sensitive transactions. This invention eventually allowed banks to use digital means to handle transactions as they developed over time. Digital methods of making transactions eventually led to the idea of digital currencies, which have been evolving for over a decade now.

Digital currencies provide people with autonomy, security, and identity protection in their transactions. Blockchains are secure systems that can’t be messed with like a typical banking system can. You have complete control over how you spend your money and exactly who you spend it with - no third parties are necessary. Essentially, digital currencies take banks and the government out of the equation, allowing you to directly connect your transaction with who you’re dealing with - and no one else.

Digital currencies have made discreet transactions possible, as a purchaser’s identity doesn’t need to be disclosed. Transactions also can’t be traced easily, much like a cash-only transaction. Digital currencies are in limited supply, so they can’t be inflated like a fiat currency - which is an attractive attribute nowadays.

Cryptocurrency is a digital or virtual currency secured by cryptography. It doesn’t have a physical form like the US dollar but exists on a blockchain that acts as a decentralized digital ledger. If you’re wondering how to buy crypto, it’s much easier than you think. You can use a variety of payment methods, all securely recorded in the blockchain. Once confirmed and validated, every transaction becomes immutable - meaning they can’t be reversed or messed with in any way.

Institutions and individuals are investing in cryptocurrencies, paving the way for the future of modern banking. When you invest in crypto, you’re entering the world of decentralized finance and getting to the forefront of the next technological advancement our modern society can boast of. Set yourself up for a successful tomorrow by investing in crypto today!

This content was published as part of a marketing partnership between PhillyVoice Media and APG.’s newsroom and editorial staff were not involved in the creation of this content.