Money is anything that people are willing to use, in order to represent systematically the value of other things for the purpose of exchanging goods and services.
Cowry shells and dollars have value only in our common imagination. Their worth is not inherent in the chemical structure of the shells and paper, or their color, or their shape.
In other words, money isn’t a material reality, it is a psychological construct.
People are willing to do such things when they trust the figments of their imagination. Trust is the raw material from which all types of money are minted.
Initially, when the first versions of money were created, people didn’t have this sort of trust, so it was necessary to define as ‘money’ things that had real intrinsic value.
History’s first known money, Sumerian barley money, is a good example. It was somewhat easier to build trust in barley as the first type of money because barley has an inherent biological value. Humans can eat it.
The real breakthrough in monetary history occurred when people gained trust in money that lacked inherent value, but was easier to store and transport. Such money appeared in ancient Mesopotamia in the middle of the third millennium BC, the silver Shekel.
Unlike the barley sila, the silver shekel had no inherent value. When they are used for anything, silver and gold are made into jewelry, crowns and other status symbols, luxury goods that members of a particular culture identify with high social status. Their value is purely cultural.
Set weights of precious metals eventually gave birth to coins. These coins had a standardized weight of gold or silver, and were imprinted with an identification mark.
First, this mark indicated how much precious metal the coin contained. Second, it identified the authority that issued the coin and that guaranteed its contents.
