INTRODUCTION

The World Trade Organization (WTO) is the only global international

organization dealing with the rules of trade between nations. At its heart are
the WTO agreements negotiated and signed by the bulk of the world's
trading nations and ratified in their parliaments. The goal is to ensure that
trade flows as smoothly, predictably, and freely as possible and to help
producers of goods and services, exporters, and importers conduct their
business. With the creation of WTO, there have been constant efforts made
to unite countries to create more markets, to standardize tariffs and trade
laws, as well as to remove trade barriers in trying to create free markets.
Below are some of the many roles of WTO:

1. It operates a global system of trade rules.

2. It acts as a forum for negotiating trade agreements.

3. It settles trade disputes between its members.

4. It supports the needs of developing countries.

WTO functions primarily as the forum for trade negotiations between

countries.

The primary purpose of the WTO is to open trade for the benefit of all, WTO
is the precursor of the General Agreement on Tariffs and Trade (GATT), which
was established by a multilateral treaty of 23 countries in 1947 after World
War II in the wake of other new multilateral institutions dedicated to
international economic cooperation such as the World Bank (founded in
1944) and the International Monetary Fund (founded in 1944). WTO is head
quartered in Geneva, Switzerland. WTO has 164 members and 22 countries
are In the process of acceding to It, making it a veritably universal
multilateral institution. Officially, each council, committee, or working party
elects its own chairperson. However, to ensure a good distribution of
appointments over all these bodies, informal consultations are held to
produce consensus on slates of chairpersons in three groups:

1. Those directly involving the General Council (including the bodies

reporting to the Trade Negotiations Committee);
2. Those reporting to the Goods Council; and

3. Those reporting to the Services Council.

All major decisions are made by the WTO’s member governments: either by
ministers (who usually meet at least every two years) or by their
ambassadors or delegates (who meet regularly in Geneva).

One of the first decisions of the current President Joe Biden of the USA was to
re-join the Paris climate agreement. Biden also conveyed strong support to
the candidature of Ngozi Okonjo-Iweala, former finance minister of Nigeria
and a former World Bank senior executive of 25 years, leading to her
appointment as the Director General of the WTO effective March 1, 2021.
Ngozi Okonjo-Iweala is the seventh director-general of the WTO becoming
the first woman and the first African to serve as director-general. Her term of
office will expire on August 31, 2025. Bridging the broken trust amongst
members of the WTO and updating the rules to meet the twenty-first century
realities are the priorities of Ngozi Okonjo-Iweala ([Link] 2021).

LESSON 1.1.

Evolution of International Trade Theory:A Glimpse

LESSON OBJECTIVES:

At the end of the lesson, the students should be able to:

1. explain how the Standard Theory of International Trade developed;

2. discuss the meaning of trade surplus;

3. elaborate on industrial capitalism;

4 contrast free trade and mercantilism;

5. distinguish between absolute advantage and comparative advantage;

6. differentiate marginal cost from opportunity cost; and

7. take a stand on whether international business and trade is beneficial or

not.
The evolution of the international trade theories reflects the ways nations
were addressing basic economic problems due to unequal distribution of
natural resources or difference in geographical locations. Over time,
economists have developed theories to address these economic problems
and explain the mechanisms of international business and trade.

The main historical theories are called classical and are from the perspective
of a country, or country-based. The classical country-based theories include
mercantilism, absolute advantage, comparative advantage, and Heckscher-
Ohlin theories. By the mid-twentieth century, the theories began to shift to
explain trade from a firm-, rather than a country-based, perspective. These
theories are referred to as modern and are firm-based or company-based.
The modern firm-based theories include country similarity, product life cycle,
global strategic rivalry, and Porter's national competitive advantage
([Link] 2021). There are also other theories, like liberalism,
professionalism, free trade theory, and the Leontiff Paradox. We will discuss
these theories in later chapters of this textbook.

The evolution of what is recognized as the Standard Theory of International

Trade goes back to the years when Adam Smith's Wealth of Nations (1776)
and David Ricardo's Principles of Economics (1951) were published. One of
the earliest efforts to develop an economic theory, the theory is a classical,
country-based international trade theory that states that a country's wealth
is determined by its holdings of gold and silver.

The works of Smith and Ricardo herald the formulation of a theory of free
trade, based on the unprecedented success of England in the respective
fields of industry and trade. Smith considered division of labor, as observed
in the nascent large-scale industries of his homeland England, as the base
for lowering labor costs, which ensured effective competition across
countries. Division of labor is the separation of a work process into a number
of tasks, with each task performed by a separate person or group of persons
to boost productivity and efficiency and enhance specialization. The possible
dilemmas in terms of the need for monetary adjustments for countries
having a continuous trade surplus with absolute advantage in all traded
goods could be shelved aside by relying on the automatic adjustment as
posited by Smith's contemporary, David Hume (1776) when he offered the
theory of the price-specie flow mechanism. Trade surplus is the amount by
which the value of a country's exports exceeds the cost of its imports. It was
left to Ricardo to sort out the basic premises of a theory of free trade, which
Smith had initiated. Industrial capitalism in Ricardo's England was at a
relatively advanced stage as compared to what it was in Smith's time, both
with rapid growth of large-scale industries and captive markets in overseas
colonies. Industrial capitalism was the second phase of capitalism in which
industries/factories became the dominant factor in the production of goods.
Imports of wage goods (corn) had a special role by cheapening wage goods;
hence, labor cost. Free trade, as opposed to the mercantilist policies of
protection, was championed by both Smith and Ricardo as a route to achieve
production efficiency at a global level. In a free trade system, individuals
benefit from a greater choice of affordable goods, while mercantilism
restricts imports and reduces the choices available to consumers. Ricardo's
cost calculations, despite his concerns for the introduction of machinery on a
large scale, were based on labor hours, which were treated as a single
homogeneous input with production in a two-commodity world, subject to
constant costs. It was comparative advantage and not absolute advantage,
which was considered both necessary, as well as sufficient, to ensure
mutually gainful trade across nations, warranting complete specialization in
the specific commodity with a comparative advantage in terms of labor
hours used per unit of output ([Link] 2021).

Absolute advantage is the country's inherent ability to produce specific

goods efficiently and effectively at a relatively lower marginal cost, lesser
workforce, lesser time, and lesser cost without compromising the quality.
Comparative advantage refers to the country's capability to produce the
specific good at lower marginal cost and opportunity cost compared to other
countries. While absolute advantage emphasizes marginal cost, comparative
advantage considers both marginal and opportunity cost.

Marginal cost is the cost incurred in producing an additional unit of a product.

Opportunity cost means the value you will get from an alternative that you
did not choose. For example, you can earn interest on money if you deposit it
in the bank, but you opted to spend it or lend it to somebody. The interest
you would have earned in the bank is the opportunity cost of the money you
spent or lent to somebody.

The Theory of International Trade and Commercial Policy, still considered to

be one of the oldest branches of economic thought, has evolved from the
Standard Theory of International Trade. From the ancient Greeks to the
present, government officials, intellectuals, and economists have deliberated
about the determinants of international trade, have discussed whether trade
is beneficial or harmful to nations, and, more importantly, have tried to
determine what trade policy is best for any particular country. Since the time
of the ancient Greek philosophers, there has been a dual view of trade: a
recognition of the benefits of international exchange combined with a
concern that certain domestic industries, laborers, or culture would be
harmed by foreign competition. Depending upon the weights put on the
overall gains from trade or on the losses of those harmed by imports,
different analysts have arrived at different conclusions about the desirability
of having free trade. But economists have likened free trade to technological
progress; although some narrow interests may be harmed, the overall
benefits to society are substantial. Still, as evidenced by the intense debates
over trade today, the tensions inherent in this dual view of trade have never
been overcame ([Link] 2021).

Despite such concerns over international trade, international business and

trade had flourished in our times redounding to mutual benefits for
participants. Industry and trade had significantly improved and
underdeveloped and developing countries have gained advantages.
Therefore, we can only look forward to more globalization in international
business and trade in the years ahead, more so with the advancement of
technology and e-commerce.

LESSON SUMMARY

1. The main historical theories are called classical and are from the
perspective of a country, or country-based. By the mid-twentieth century,
the theories began to shift to explain trade from a firm-, rather than a
country-based, perspective; hence, referred to as modern and are firm-based
or company-based.

2. The evolution of what is recognized as the Standard Theory of

International Trade goes back to the years when Adam Smith's Wealth of
Nations (1776) and David Ricardo's Principles of Economics (1951) were
published. The theory is a classical, country-based international trade theory
that states that a country's wealth is determined by its holdings of gold and
silver.
3. Smith and Ricardo herald the formulation of a theory of free trade. Free
trade, as opposed to the mercantilist policies of protection, was championed
by both Smith and Ricardo as a route to achieve production efficiency at a
global level.

4. The possible dilemmas in terms of the need for monetary adjustments for
countries having a continuous trade surplus could be shelved aside by
relying on the automatic adjustment as posited by Smith's contemporary,
David Hume (1776), when he offered the theory of the price-specie flow
mechanism.

5. Division of labor is the separation of a work process into a number of

tasks, with each task performed by a separate person or group of persons to
boost productivity and efficiency and enhance specialization.

6. Trade surplus is the amount by which the value of a country's exports

exceeds the cost of its imports.

7. Industrial capitalism was the second phase of capitalism in which

industries/factories became the dominant factor in the production of goods.

8. In a free trade system, individuals benefit from a greater choice of

affordable goods, while mercantilism restricts imports and reduces the
choices available to consumers.

9. Absolute advantage is the country's inherent ability to produce specific

goods efficiently and effectively at a relatively lower marginal cost, lesser
workforce, lesser time, and lesser cost without compromising the quality.

10. Comparative advantage refers to the country's capability to produce the

specific good at lower marginal cost and opportunity cost compared to other
countries.

11. Marginal cost is the cost incurred in producing an additional unit of a

product. Opportunity cost means the value you will get from an alternative
that you did not choose.

12. The Standard Theory of International Trade has evolved into the Theory
of International Trade and Commercial Policy, still considered to be one of the
oldest branches of economic thought. From the ancient Greeks to the
present, government officials, intellectuals, and economists have deliberated
about the determinants of international trade, have discussed whether trade
is beneficial or harmful to nations, and, more importantly, have tried to
determine what trade policy is best for any particular country.
KEY TAKEAWAYS

1. The classical theories of international trade are the historical country-

based theories.

2. The modern mid-twentieth century theories are referred to as firm-based

or company-based.

3. Adam Smith published Wealth of Nations (1776) and David Ricardo

published Principles of Economics (1951).

4. The Standard Theory of International Trade is a classical, country-based

international trade theory that states that a country's wealth is determined
by its holdings of gold and silver.

5. In a free trade system, individuals benefit from a greater choice of

affordable goods, while mercantilism restricts imports and reduces the
choices available to consumers.

6. Division of labor is the separation of a work process into a number of

tasks, with each task performed by a separate person or group of persons.

7. Trade surplus is the amount by which the value of a country's exports

exceeds the cost of its imports.

8. Industrial capitalism was the second phase of capitalism in which

industries/factories became the dominant factor in the production of goods.

9. Absolute advantage is the country's inherent ability to produce specific

goods efficiently and effectively at a relatively lower marginal cost.

10. Comparative advantage refers to the country's capability to produce

specific goods at lower marginal cost and opportunity cost.

11. Marginal cost is the cost incurred in producing an additional unit of a

product.

12. Opportunity cost means the value you will get from an alternative that
you did not cproduc

13. The Theory of International Trade and Commercial Policy, still considered
to be one of the oldest branches of economic thought, has evolved from the
Standard Theory of International Trade.
DISCUSSION QUESTIONS

Instruction: Answer the following questions comprehensively.

1. Explain how the Standard Theory of International Trade developed.

2. Discuss the meaning of trade surplus.

3 Elaborate on industrial capitalism.

4. Contrast free trade and mercantilism.

5. Distinguish between absolute advantage and comparative advantage

6. Differentiate marginal cost from opportunity cost.

CONNECTIONS AND APPLICATIONS

In at least two paragraphs, write your reflections on the following aspects of

the lesson discussed earlier on a separate sheet of paper.

Industrial Business and Trade: Beneficial or Not?

GRADING RUBRICS

Criteria

Focus and Details

A, B+

There is one clear, well-focused topic. Main ideas are clear and are well
supported by detailed and accurate information.

Organization

The introduction is interesting, states the main topic, and provides an

overview of the paper. Information is relevant and presented in a logical
order. The conclusion is strong.

Word Choice
The writer uses vivid words and phrases. The choice and placement of words
seem accurate, natural, and not forced.

Sentence Structure, Grammar, and Spelling

All sentences are well constructed and have varied structure and length. The
writer makes no errors in grammar and/or spelling.

B, C+

There is one clear, well-focused topic. Main ideas are clear, but are not well
supported by detailed information.

The introduction is interesting, states the main topic, and provides an

overview of the paper. A conclusion is included.

C, D+, D

There is one topic. Main ideas are somewhat clear.

The introduction states the main topic. A conclusion is included.

The writer uses vivid words and phrases. The choice and placement of words
are inaccurate at times.

Most sentences are well constructed and have varied structure and length.
The writer makes a few errors in grammar and/or spelling, but they do not
interfere with understanding.

The writer uses words to communicate clearly, but writing lacks variety.

Most sentences are well constructed, but they have a similar structure and/or
length. The writer makes several errors in grammar and/or spelling that
interfere with understanding.

The topic and main ideas are not clear

There is no clear introduction, structure, or conclusion.

The writer uses limited vocabulary. Jargon or clichés are present and detract
from the meaning.
Sentences sound awkward, are distractingly repetitive, or are difficult to
understand. The writer makes numerous errors in grammar and/or spelling
that interfere with understanding.

LESSON 1.2.

Barter

LESSON OBJECTIVES:

At the end of the lesson, the students should be able to:

1. Explain the meaning of barter;

2. Discuss the development of barter;

3. Elaborate on the advantages of barter; and

4. Elucidate on the disadvantages of barter.

To better understand how modern international business and trade has

evolved, it is important to understand how countries traded with one another
historically. Before money existed, people used other systems to perform
exchanges. The barter of goods or services among different peoples is an
age-old system, probably as old as human history. This system has been in
practice for centuries facilitating the exchange of goods and services before
the advent of the monetary system. Bartering involves a direct
trade/exchange of goods and services. People exchanged their goods or
services for other goods or services other people have in return. During
ancient times, barter system was a local phenomenon, which involved
people in the same locality. Later, however, it developed to include the other
areas around the vicinity and, thereafter, became a system of trade between
and among different places.

Bartering is the process of trading services or goods between two parties

without using money in the transaction. Even people without money can get
something they need. In bartering, a service can be exchanged for an item,
an item exchanged for a service, or an item can be exchanged for some
other item. Someone can cut somebody’s hair in exchange for a bunch of
bananas or washing of clothes can be exchanged for a half sack of rice or
fish can be exchanged for rice.

During the Middle Ages, the Europeans started traveling across the globe
and used barter services to trade their goods like fur and crafts to the East,
in exchange for perfumes and silk. The people of colonial America used
wheat, skin of male deer (bucks), and musket balls to do business. They were
also experts in exchanging services. If members of one family agreed to help
their neighbors in planting their crops, the latter would help the former in
painting their houses. In the initial years of Oxford and Harvard Universities,
students used to pay their fees in terms of food items, firewood, or livestock.
Even today, some folks in the barrios pay their doctors with their harvests or
with their livestock.

The advantage of bartering is that it does not involve money. It is very simple
such that issues confronted in international trade like foreign exchange and
unbalanced economic power are virtually nonexistent. However, some
disadvantages also exist. It is difficult to find people who need what the other
people have. Also, in barter, it is difficult to find the value of what one has
versus the value of what the other one has. There is no standard measure of
value. It is time-consuming Parties in the bartering transaction will need to
spend time agreeing on the terms of the deal. It is common for both parties
to place a higher value on their own goods or services and a lower value on
the other party’s goods or services. If someone’s goods are perishable, it is
hard to preserve it. That someone needs to immediately find someone willing
to exchange what they have or the perishable will perish and go to waste.
Trade and barter were precursors to the monetary system used in today’s
society. Although trade and barter may seem almost archaic, they were the
business solutions for people who lived before the convenience of money
and the credit card.

The invention of money did not put an end to bartering services. Monetary
crises fueled the revival of this system and the current recession has once
again set a stage for its comeback. With the advent of more sophisticated
techniques that aid trading through the internet, barter is once more present
in our current times. There are now swap markets and online auctions. Even
though money is there for trading and business, the barter system will
continue to exist and become stronger and more organized. There are
numerous websites that offer online bartering arrangements.
Historyplex has the following account for the development of barter through
the centuries. The author had inserted some relevant information in
appropriate time slots in the account:

Early Humans: The early humans had very little needs. They used leaves and
animal skin as clothes, and ate vegetables, fruits, fish, and animal meat.
There was no need for exchange of goods, as their needs were limited.

Formation of Groups: As the number of people increased, the early humans

had to travel long distances to find food. They started forming groups. The
members of each group stayed together while traveling and hunting. Initially,
they refrained from any interaction with other groups. Gradually, however,
intergroup interaction started and this paved the way for a system of trading.
They started exchanging their goods for what they needed, which the other
groups had. This type of exchange was mainly done to fulfill basic needs, like
food, clothes, and the like.

Cultivation and Farming: After years of nomadic life (migratory, mobile,

wandering), people started settling down in areas, where they began growing
plants and raising farm animals. As cultivation and farming flourished, there
was no shortage of food. People then had enough time to spend on other
work, like pottery, carpentry, weaving, and the like. They started developing
other skills, too. With surplus goods in hand and additional skills to trade,
they started trading surplus goods for goods and services they needed. The
system of trade flourished. People started traveling long distances to
exchange goods and services.

Evolution of the Barter System: The system of trading, wherein goods and
services were exchanged for other goods and services, without any medium,
like money, is called barter. The history of bartering can be traced back to
6000 BC. It is believed that barter system was introduced by the tribes of
Mesopotamia. This system was then adopted by the Phoenicians, who
bartered their goods to people in other cities located across the oceans. An
improved system of bartering was developed in Babylonia, too. People used
to exchange their goods for weapons, tea, spices, and food items.
Sometimes, even human skulls were used for barter. Another popular item
used for exchange was salt. Salt was so valuable at that time that the salary
of Roman soldiers was paid in salt. The main drawback of this system was
that there were no standard criteria to determine the value of goods and
services, and this resulted in disputes and clashes.

LESSON SUMMARY

1. Bartering involves a direct trade/exchange of goods and services. It is the

process of trading services or goods between two parties without using
money in the transaction.

2. During ancient times, barter system was a local phenomenon, which

involved people in the same locality. Later, however, it developed to include
the other areas around the vicinity and, thereafter, became a system of
trade between and among different places.

3. During the Middle Ages, the Europeans started traveling across the globe
and used barter services to trade their goods like fur and crafts to the East,
in exchange for perfumes and silk. The people of colonial America used
wheat, skin of male deer (bucks), and musket balls to do business. They were
also experts in exchanging services.

4. The advantage of bartering is that it does not involve money and it is very
simple. However, some disadvantages also exist. It is difficult to find people
who need what the other people have. There is no standard measure of
value. It is time-consuming.
5. Trade and barter were precursors to the monetary system used in today's
society. Although trade and barter may seem almost archaic, they were the
business solutions for people who lived before the convenience of money
and the credit card.

6. The invention of money did not put an end to bartering services. Monetary
crises fueled the revival of this system and the current recession has once
again set a stage for its comeback. There are now swap markets and online
auctions. There are numerous websites that offer online bartering
arrangements.

7. The early humans had very little needs. They used leaves and animal skin
as clothes and ate vegetables, fruits, fish, and animal meat. There was no
need for exchange of goods, as their needs were limited.

8. As the number of people increased, the early humans had to travel long
distances to find food and started forming groups. The members of each
group stayed together while traveling and hunting, refraining from any
interaction with other groups.

9. Gradually, however, intergroup interaction started and this paved the way
for a system of trading, where groups started exchanging their goods for
what they needed, which the other groups had.

10. After years of nomadic life (migratory, mobile, wandering), people started
settling down in areas, where they began growing plants and raising farm
animals. As cultivation and farming flourished, people then had enough time
to spend on other work, like pottery, carpentry, weaving, and the like. They
started trading surplus goods and the system of trade flourished.

11. The history of bartering can be traced back to 6000 BC. The barter
system was introduced by the tribes of Mesopotamia, then adopted by the
Phoenicians who bartered their goods to people in other cities located across
the oceans. An improved system of bartering was developed in Babylonia,
too.

12. People used to exchange their goods for weapons, tea, spices, and food
items. Sometimes, even human skulls were used for barter. Another popular
item used for exchange was salt. Salt was so valuable at that time that the
salary of Roman soldiers was paid in salt.

KEY TAKEAWAYS

1. Bartering involves a direct trade/exchange of goods and services.

2. The advantage of bartering is that it does not involve money and it is very
simple.

3. However, it is difficult to find people who need what the other people have
and there is no standard measure of value.

4. Even today, there are swap markets, online auctions, and numerous
websites that offer online bartering arrangements.

5. The early humans had very little needs and there was no need for
exchange of goods.

6. As the number of people increased, they started forming groups and

travelled long distances to find food.

7. Gradually, however, intergroup interaction started and this paved the way
for a system of trading.
8. As cultivation and farming flourished, there was no shortage of food. They
started trading surplus goods and the system of trade flourished.

9. The history of bartering can be traced back to 6000 BC, when the barter
system was introduced by the tribes of Mesopotamia, then adopted by the
Phoenicians, and improved by the Babylonians.

10. Salt was so valuable at that time that the salary of Roman soldiers was
paid in salt.

DISCUSSION QUESTIONS

Instruction: Answer the following questions comprehensively.

1. Explain the meaning of barter.

2. Elaborate on the advantages of barter.

3. Elucidate on the disadvantages of barter.

CONNECTIONS AND APPLICATIONS

In at least two paragraphs, write your reflections on the following aspects of

the lesson discussed earlier on a separate sheet of paper. Use the grading
rubrics in Lesson 1.1.

The Development of Barter

LESSON 1.3. Origin of Money

LESSON OBJECTIVES:

At the end of the lesson, the students should be able to:

1. Trace the origin of money;

2. Give examples of items used as money:
3. Explain the meaning of mint and minting; and
4. Discuss the role of China, Lydia, Canada, and France in the
development of money.

Though trade was done through barter, people started confronting some
problems with the system. In order to exchange an item, the seller must
have the specific good the buyer needs and vice versa. This was not always
possible. Another major drawback was lack of a common value to measure
the value of goods. So people started stacking certain valuable things that
were acceptable for a majority. They included salt, metal, farm animals, and
the like. Materials, like shells, feathers, and animal teeth, were also used as
money. This was made possible after they agreed upon specific values for
these materials and use the same for trade. However, it became difficult to
carry and use these materials. So traders wanted something that was not
perishable and easy to carry as a medium of exchange. This led to the use of
metal pieces as money.

It is believed that the first recognizable metal coins appeared in China,

during 1000 BC. The earliest currency of China of the eighth century BC
consisted of miniature hoes and billhooks (pruning implements), with
inscriptions indicating the authority. Sometime around 770 BC, miniature
replicas of tools and weapons cast in bronze were used by the Chinese as a
medium of exchange. The small bronze celts (prehistoric tools resembling
chisels) and bronze rings frequently found in hoards in Western Europe
probably played a monetary role. Even in modern times, such mediums of
exchange as fishhook currency have been known. Due to impracticality,
these tiny daggers, spades, and hoes were eventually abandoned for objects
in the shape of a circle. These objects became some of the first coins.
Around 700 BC, the Chinese moved from coins to paper money. By the time
Marco Polo (the Venetian merchant, explorer, and writer who travelled
through Asia along the Silk Road between AD 1271 and 1295) visited China
in approximately AD 1271, the emperor of China had a good handle on both
the money supply and various denominations.

Silver items, and tobacco for animal pelts, especially those of the beaver.
The first colonial settlement at Quebec on the St. Lawrence River was
established by Samuel de Champlain in 1608. The beaver pelt was the one
universally accepted medium of exchange in the infant colony, although
wheat and moose skins were also employed as legal tender. As the colony
expanded and its economic and financial needs became more complex, coins
from France came to be widely used.

Silver and copper coins designed especially for the colonies was minted in
1670 due to the inability to keep coins in circulation in French colonies in the
Americas. These coins could not be circulated in France. While apparently
intended only for the West Indies, a small number of these coins are believed
to have circulated in Canada. The West Indies are a chain of islands in the
Caribbean Sea and Atlantic Ocean divided into three groups: The Bahamas,
the Greater Antilles, and the Lesser Antilles. The West Indies are stretched
from the Bahamas in the north, all the way south to the northern shores of
South America. During the mid-1600s, Spanish dollars (piastres) began to
circulate in the French colonies owing to illegal trading with English and
Dutch settlers to the south, who used them extensively. Full-weighted
Spanish dollars were stamped with a fluer-de-lys and were valued at four
livres, while light coins, depending on their weight, were stamped with a
fleur-de-lys and a Roman numeral with the lightest coin assigned a value of
only 3 livres. These over-stamped Spanish dollars represent the first
distinctive Canadian coins. Figure 1.1 shows the Spanish dollar piasters.

Figure 1.1. Spanish Dollar Piastres

In 1685, the colonial authorities in New France found themselves short of

funds. Jacques de Meulles, Intendant of Justice, Police, and Finance came up
with the temporary issuance of paper money printed on playing cards. Card
money was purely a financial expedient initially, but was later acknowledged
as a medium of exchange. The first issue of card money occurred on June 8,
1685 and was redeemed three months later. These cards were readily
accepted by merchants and the general public and circulated freely at face
value. Card money was next issued in February 1686. Because of another
revenue shortfall, the colonial authorities Although China was the first
country to use coins, the first region of the world to use an industrial facility
to manufacture coins (a mint) that could be used as currency was in Europe,
in the region called Lydia (now western Turkey). Minting is the process of
making a coin by stamping metal. In 600 BC, around the time China started
using paper money, Lydia's King Alyattes minted the first official currency,
non-standardized coins from electrum (a naturally occurring alloy of gold and
silver) that did not have a standardized value. King Croesus (son of King
Alyattes) (reigned 560-546 BC) produced a bimetallic system of pure gold
and pure silver coins. The Croeseld, anciently Kroiseioi stateres, was a type
of coin, either in gold or silver, which was minted in Sardis by the king of
Lydia, Croesus, from around 550 BC. Croesus is credited with issuing the first
true gold coins with a standardized purity for general circulation, and the
world's first bimetallic monetary system. While these coins were in
circulation, it was the issuing of the Croeseid that changed the way that
people did trade. Lydia's currency helped the country increase both its
internal and external trading systems, making it one of the richest empires in
Asia Minor. Today, when someone says, "as rich as Croesus," they are
referring to the last Lydian king who minted the first gold coin
([Link] 2021).

The foundation deposit of the Artemisium (temple to Artemis) at Ephesus

shows that electrum (which the Greeks called "white gold") coins were in
production even before Croesus, possibly under King Gyges. The coins were
stamped with pictures that acted as denominations. They were stamped on
one side with the facing heads of a lion and a bull; this type was later
transferred to the bimetallic series of pure gold and pure silver. The early
electrum coinage consisted of small, thick, bean-shaped pieces, with a
device stamped in relief on one side, the other being roughly impressed.
Their intrinsic value fluctuated according to their gold and silver content, but
the weight of the unit was fairly steady at about seven to eight grams, and
the types stamped on them were the guarantee of authority.
The Bank of Canada ([Link] 2021) had the following account of
the history of the Canadian dollar:

The European colonial governments in North America issued the first paper
currency. Because shipments between Europe and the North American
colonies took so long, the colonists often ran out of cash as operations
expanded. Instead of going back to a barter system, the colonial
governments issued IOUS (promissory notes) that traded as a currency. The
first instance was in Canada (then a French colony).

According to Adam Shortt, the great Canadian economic historian, the first
regular system of exchange in Canada involving Europeans occurred in
Tadaoussac in the early seventeenth century, where French traders bartered
each year with the Mantagnais people (also known as the Innu) trading
weapons, cloth, food, reissued card money in 1690. The following year, with
yet another issue of card money, the Governor, Louis de Buade, Comte de
Frontenac, acknowledged the useful role that card money played as a
circulating medium of exchange in addition to being a financing tool. The
cards served as money in Canada, just as coin did in France.

Transporting gold and silver across the Atlantic was risky and to attract and
retain fresh supplies of coin, coins were given a higher value in the French
colonies in Canada than in France. In 1717, all debts and contract in Canada
became payable in monnoye de France. Below are some sample images of
the monnoye de France.

Figure 1.2. Monneye de France

The livre (French for "pound" and the name of both units of account and
coins) was the currency of the Kingdom of France and its predecessor state
of West Francia from 1781 to 1794. Figure 1.3 shows a sample image of a
French livre.

Figure 1.3. French Livre

Copper coins were introduced in 1722, but they were not well received by
merchants. Notes issued by private individuals based on their own credit
standing also circulated as money, which continue periodically well into the
nineteenth century. The government, once again short of funds, also issued
promissory notes called ordonnances and treasury notes called acquits,
which began to circulate as money. In March 1729, card money, which were
strictly limited, were legal tender for all payments and replaced the
ordonnances in circulation. Legal tender means currency, such as coin and
paper money, that are declared by law to be valid and sufficient for the
payment of debts, and meet a financial obligation, including tax payments,
contracts, and legal fines or damages. By the early 1750s, the distinction
between card money and treasury notes had largely disappeared and by
1757, the government had discontinued payment in specie; all payments
were made in paper. A rapid increase in the amount of paper in circulation
during the late 1750s led to rapid inflation. Inflation means increase in
prices, reducing the purchasing power of money.

On October 15, 1759, the French government suspended payment of bills of

exchange drawn on the Treasury for payments of expenses in Canada until
three months after peace was restored. Paper money traded at a sharp
discount and ultimately became worthless following the British conquest in
1760. Gold and silver, which had been hoarded, came back into circulation.
Settlement of the paper obligations issued by the colonial authorities in
Canada was included in the Treaty of Paris, signed in February 1763, which
ended the war between Great Britain and France.

The advent of paper money led to an increase in international trade. Today,

physical currency is not required, as electronic money is widely used for
monetary transactions. In fact, we now have digital/virtual currencies or
cryptocurrencies.

LESSON SUMMARY
1. It is believed that the first recognizable metal coins appeared in China,
during 1000 BC. The earliest currency of China of the eighth century BC
consisted of miniature hoes and billhooks (pruning implements), with
inscriptions indicating the authority.

2. Sometime around 770 BC, miniature replicas of tools and weapons cast in
bronze were used by the Chinese as a medium of exchange. The small
bronze celts (prehistoric tools resembling chisels) and bronze rings played a
monetary role. Due to impracticality, these tiny daggers, spades, and hoes
were eventually abandoned for objects in the shape of a circle. These objects
became some of the first colns.

3. Around 700 BC, the Chinese moved from coins to paper money. By the
time Marco Polo (the Venetian merchant, explorer, and writer) visited China
in approximately AD 1271, the emperor of China had a good handle on both
the money supply and various denominations.

4. The first region of the world to use an industrial facility to manufacture

coins (a mint) was in Europe, in the region called Lydia (now western Turkey).

Minting is the process of making a coin by stamping metal. In 600 BC, around
the time China started using paper money, Lydia's King Alyattes minted the
first official currency, non-standardized coins from electrum (a naturally
occurring alloy of gold and silver) that did not have a standardized value.

5. King Croesus (son of King Alyattes) of Lydia (reigned 560-546 BC)

produced a bimetallic system of pure gold and pure silver coins. The
Croeseid, anciently Kroiseioi stateres, was a type of coin, either in gold or
silver, which was minted in Sardis by King Croesus, from around 550 BC.
Croesus is credited with issuing the first true gold coins with a standardized
purity for general circulation, and the world's first bimetallic monetary
system.

6. The foundation deposit of the Artemisium (temple to Artemis) at Ephesus

shows that electrum (which the Greeks called "white gold") coins were in
production even before Croesus, possibly under King Gyges.
7. The European colonial governments in North America issued the first
paper currency in Canada (then a French colony). Instead of going back to a
barter system, the colonial governments issued IOUs (promissory notes) that
traded as a currency.

8. According to Adam Shortt, the great Canadian economic historian, the first
regular system of exchange in Canada involving Europeans occurred in
Tadaoussac in the early seventeenth century, where French traders bartered
each year with the Mantagnais people (also known as the Innu) trading
weapons, cloth, food, silver items, and tobacco for animal pelts. especially
those of the beaver.

9. The first colonial settlement at Quebec on the St. Lawrence River was
established by Samuel de Champlain in 1608. The beaver pelt was the one
universally accepted medium of exchange in the infant colony, although
wheat and moose skins were also employed as legal tender. As the colony
expanded and its economic and financial needs became more complex, coins
from France came to be widely used.

10. Silver and copper coins designed especially for the colonies was minted
in 1670. These coins could not be circulated in France. While apparently
intended only for the West Indies, a small number of these coins are believed
to have circulated in Canada.

11. The West Indies are a chain of islands in the Caribbean Sea and Atlantic
Ocean divided into three groups: The Bahamas, the Greater Antilles, and the
Lesser Antilles.

12. During the mid-1600s, Spanish dollars (piastres) began to circulate in the
French colonies These over-stamped Spanish dollars represent the first
distinctive Canadian coins.
13. The livre (French for "pound" and the name of both units of account and
coins) was the currency of the Kingdom of France and its predecessor state
of West Francia from 1781 to 1794.

14. In 1685, Jacques de Meulles, Intendant of Justice, Police, and Finance

came up with the temporary issuance of paper money printed on playing
cards, Card money served as money in Canada, just as coin did in France.

15. In 1717, all debts and contract in Canada became payable in monnoye
de France.

16. Copper coins were introduced in 1722, but they were not well received by
merchants. Notes issued by private individuals based on their own credit
standing also circulated as money. The government issued promissory notes
called ordonnances and treasury notes called acquits, which began to
circulate as money.

17. In March 1729, card money was legal tender for all payments and
replaced the ordonnances in circulation. Legal tender means currency, such
as coin and paper money, is valid and sufficient for the payment of debts. A
rapid increase in the amount of paper in circulation during the late 1750s led
to rapid inflation. Inflation means increase in prices, reducing the purchasing
power of money.

18. On October 15, 1759, the French government suspended payment of bills
of exchange drawn on the Treasury for payments of expenses in Canada until
three months after peace was restored. Paper money traded at a sharp
discount and ultimately became worthless following the British conquest in
1760. Gold and silver, which had been hoarded, came back into circulation.

19. Settlement of the paper obligations issued by the colonial authorities in

Canada was included in the Treaty of Paris, signed in February 1763, which
ended the war between Great Britain and France.
20. The advent of paper money led to an increase in international trade.
Today, physical currency is not required, as electronic money is widely used
for monetary transactions. In fact, we now have digital/virtual currencies or
cryptocurrencies.

KEY TAKEAWAYS

1. The first recognizable metal coins appeared in China, during 1000 Bс.

2. Sometime around 770 BC, the small bronze celts (prehistoric tools
resembling chisels) and bronze rings played a monetary role.

3. Objects in the shape of a circle became some of the first coins.

4. Around 700 BC, the Chinese moved from coins to paper money..

5. The first mint, an industrial facility to manufacture coins, was established

in Lydia (now western Turkey).

6. Minting is the process of making a coin by stamping metal.

7. In 600 BC, around the time China started using paper money, Lydia's King
Alyattes minted the first official currency, non-standardized coins from
electrum (a naturally occurring alloy of gold and silver).

8. King Croesus (son of King Alyattes) of Lydia is credited with installing the
world's first bimetallic monetary system of pure gold and pure silver coins,
the Croeseld (anciently Kroiseioi stateres), around 550 BC.
The foundation deposit of the Artemisium (temple to Artemis) at Ephesus
shows that electrum (which the Greeks called "white gold") coins were in
production even before Croesus, possibly under King Gyges.

10. The European colonial governments in North America issued the first
paper currency in Canada (then a French colony). Instead of going back to a
barter system, the colonial governments issued IOUs (promissory notes) that
traded as a currency.

11. The first regular system of exchange in Canada involving Europeans

occurred in Tadaoussac in the early seventeenth century, where French
traders bartered each year with the Mantagnais people (also known as the
Innu) trading weapons, cloth, food, silver items, and tobacco for animal pelts,
especially those of the beaver.

12. The first colonial settlement at Quebec was established by Samuel de

Champlain in 1608.

13. The beaver pelt was the one universally accepted medium of exchange
in Quebec, although wheat and moose skins were also employed as legal
tender. As the colony expanded and its economic and financial needs
became more complex, coins from France came to be widely used.

14. Silver and copper coins, apparently intended only for the West Indies,
was minted in 1670, believed to have circulated in Canada, but could not be
circulated in France.

15. The West Indies are a chain of islands in the Caribbean Sea and Atlantic
Ocean divided into three groups: The Bahamas, the Greater Antilles, and the
Lesser Antilles.

16. During the mid-1600s, Spanish dollars (piastres) represent the first
distinctive Canadian coins.
17. The livre (French for "pound") was the currency of the Kingdom of France
and its predecessor state of West Francia from 1781 to 1794.

18. In 1685, Jacques de Meulles, Intendant of Justice, Police, and Finance

came up with the card money, which served as money in Canada, just as
coin did in France, but it was only in March 1729 that card money became
legal tender and replaced the ordonnances in circulation.

19. Legal tender means currency, such as coin and paper money, is valid and
sufficient for the payment of debts.

20. Inflation means increase in prices, reducing the purchasing power of

money.

21. In 1717, all debts and contract in Canada became payable in monnoye
de France.

22. Copper coins were introduced in 1722, but they were not well received by
merchants. Notes issued by private individuals also circulated as money.

23. The government issued promissory notes called ordonnances (replaced

later by card money) and treasury notes called acquits, which began to
circulate as money.

24. Bills of exchange drawn on the Treasury were used for payments of
expenses in Canada.

25. Settlement of the paper obligations issued by the colonial authorities in

Canada was included in the Treaty of Paris, signed in February 1763, which
ended the war between Great Britain and France.
26. The advent of paper money led to an increase in international trade.

DISCUSSION QUESTIONS

Instruction: Answer the following questions comprehensively.

1. Trace the origin of money.

2. Give examples of items used as money.

3. Explain the meaning of mint and minting.

CONNECTIONS AND APPLICATIONS

In at least two paragraphs, write your reflections on the following aspects of

the lesson discussed earlier on a separate sheet of paper. Use the grading
rubrics in Lesson 1.1.

The Role of China, Lydia, Canada, and France in the Development of Money

LESSON 1.4. History of the Philippine Currency

Figur pre-Hispa

LESSON OBJECTIVES:

At the end of the lesson, the students should be able to:

1. discuss the history of the Philippine currency during the pre-Hispanic era;
2. explain the history of the Philippine currency during the Spanish era;

3. elaborate on the history of the Philippine currency during the revolutionary

period;

4. elucidate on the history of the Philippine currency during the American

period;

5. discuss the history of the Philippine currency during the Japanese

occupation; and

6. explain the history of the Philippine currency during the Philippine

republic.

This section comes from the Bangko Sentral ng Pilipinas website ([Link]
2021) narrating the history of Philippine money.

Pre-Hispanic Era

Barter was the means of trade long before the Spaniards came to the
Philippines. Trade among the early Filipinos and with traders from the
neighboring countries like China, Java, Borneo, and Thailand was conducted
through barter. However, the inconvenience of the barter system led to the
adoption of a specific medium of exchange the cowries, a form of currency in
the world then. Ovulidae triviidae (allied cowries) family is the most popular
of all marine gastropods, having glossy, often colorfully patterned shells.
Cowries produced in gold, jade, quartz, and wood became the most common
and acceptable form of money through many centuries.

Barter rings made in gold (since the Philippines is naturally rich in gold) were
used in ancient times for personal adornment, jewelry, and the first local
form of coinage called piloncitos. These had a flat base that bore an
embossed inscription of the letters "MA" or "M" similar to the Javanese script
of the eleventh century. It is believed that this inscription was the name by
which the Philippines was known to Chinese traders during the pre-Spanish
time.

Figure 1.4 below shows an image of barter ring and piloncitos used during
the pre-Hispanic reign as a medium of exchange.

piloncitos

barter rings

Barter rings and piloncitos

Figure 1.4. Barter Rings and Piloncitos during the pre-Spanish Era

Spanish Era

1521-1897

When the Spaniards came to the Philippines, our ancestors were already
trading with China, Japan, Siam, India, Cambodia, Borneo, and the Moluccas.
The Spanish government continued trade relations with these countries, and
Manila became the center of commerce in the East. The Spaniards closed the
ports of Manila to all countries except Mexico. The Spaniards ruled the
Philippines for 300 years. The cobs or macuquinas (silver coins) of colonial
mints were the earliest coins brought in by the galleons from Mexico and
other Spanish colonies. These silver coins usually bore a cross on one side
and the Spanish royal coat-of-arms on the other. Figure 1.5 shows the cobs or
macuquinas of the Spanish era.

Figure 1.5. Cobs or Macuquinas and Dos Mundos during the Spanish Era
Due to the shortage of fractional coins, the barrillas were struck in the
Philippines as ordered by the Royalty of Spain. The barrilla, a crude bronze or
copper coin worth about one centavo, was the first coin struck in the country.
The Filipino term "barya," referring to small change, had its origin in barrilla.

Coins from other Spanish colonies also reached the Philippines and were
counter-stamped to legalize their circulation in the country. Gold coins with
the portrait of Queen Isabela were minted in Manila. Silver pesos with the
profile of young Alfonso XIII were the last coins minted in Spain. The pesos
fuertes, issued by the country's first bank, the El Banco Español Filipino de
Isabel II, were the first paper money circulated in the country.

Revolutionary Period

1898-1899

The Philippine Republic of 1898 under General Emilio Aguinaldo issued its
own coins and paper currency backed by the country's natural resources.
This time, the Philippines was asserting its independence. At the Malolos
arsenal, two types of two-centavo copper coins were struck. One-peso and
five -peso revolutionary notes printed as Republika Filipina Papel Moneda de
Un Peso and Cinco Pesos were freely circulated. These were hand-signed by
Pedro Paterno, Mariano Limjap, and Telesforo Chuidian. Figure 1.6 is an image
of the one-peso coin and the five-peso coin. With the surrender of General
Aguinaldo to the Americans, the currencies were withdrawn from circulation
and declared illegal currency.

Figure 1.6. Two-Centavo Copper Coin and Republika Filipina Papel Moneda de
Un Peso and Cinco Pesos Revolutionary Notes

American Period 1900-1941

With the coming of the Americans in 1898, modern banking, currency, and
credit systems were instituted making the Philippines one of the most
prosperous countries in East Asia. The Americans instituted a monetary
system for the Philippines based on gold (gold standard) and pegged the
Philippine peso to the American dollar at the ratio of 2:1, two pesos = one US
dollar. The US Congress approved the Coinage Act for the Philippines in 1903.
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 per unit of
currency. The coins issued under the system bore the designs of Filipino
engraver and artist, Melecio Figueroa. Coins in denomination of one-half
centavo to one peso were minted. The renaming of El Banco Español Filipino
to Bank of the Philippine Islands in 1912 paved the way for the use of English
from Spanish in all notes and coins issued up to 1933. Beginning May 1918,
treasury certificates replaced the silver certificates series, and a one-peso
note was added.

Figure 1.7 shows the image of the 50 pesos and five pesos during the
American period.

Figure 1.7. Fifty Pesos and Five Pesos during the American Period

The Japanese Occupation 1942-1945

The outbreak of World War II caused serious disturbances in the Philippine

monetary system. Two kinds of notes circulated in the country during this
period. The Japanese Occupation Forces issued war notes in high
denominations. These war notes had no back up reserves, thus, Filipinos
dubbed it as "Mickey Mouse" money. During the worst inflation in Philippine
history, Filipinos would go to the market laden with "bayongs" of Mickey
Mouse bills, since one duck egg costs 75 pesos, and a box of matches more
than 100 pesos. On the other hand, guerrilla notes or resistance currencies,
which are in low denominations, were issued by different provinces and, in
some instances, municipalities through their local currency boards to show
resistance against the Japanese occupation. Figure 1.8 shows the Japanese
two pesos and 100 pesos.

LESSON SUMMARY

1. Barter was the means of trade long before the Spaniards came to the
Philippines. However, the inconvenience of the barter system led to the
adoption of a specific medium of exchange the cowries, glossy, often
colorfully patterned shells. Cowries produced in gold, jade, quartz, and wood
became the most common and acceptable form of money through many
centuries.

2. Barter rings made in gold were the first local form of coinage called
piloncitos. These had a flat base that bore an embossed inscription of the
letters "MA" or "M," believed to be the name by which the Philippines was
known to Chinese traders during the pre-Spanish time.

3. The Spaniards ruled the Philippines from 1521-1897 (over 300 years). The
cobs or macuquinas (silver coins) of colonial mints were the earliest coins
brought in by the galleons from Mexico and other Spanish colonies. These
silver coins usually bore a cross on one side and the Spanish royal coat-of-
arms on the other.

4. The barrilla, a crude bronze or copper coin worth about one centavo, was
the first coin struck in the country as ordered by the Royalty of Spain. The
Filipino term "barya," referring to small change, had its origin in barrilla.

5. Gold coins with the portrait of Queen Isabela were minted in Manila. Silver
pesos with the profile of young Alfonso XIII were the last coins minted in
Spain. The pesos fuertes, issued by the country's first bank, the El Banco
Español Filipino de Isabel II, were the first paper money circulated in the
country.

6. The Philippine Republic of 1898 under General Emilio Aguinaldo issued its
own coins and paper currency backed by the country's natural resources. At
the Malolos arsenal, two types of two-centavo copper coins were struck. One-
peso and five-peso revolutionary notes printed as Republika Filipina Papel
Moneda de Un Peso and Cinco Pesos were freely circulated.

7. With the coming of the Americans in 1898, modern banking, currency and
credit systems were instituted making the Philippines one of the most
prosperous countries in East Asia. The Americans instituted a monetary
system for the Philippine based on gold (gold standard) and pegged the
Philippine peso to the American dollar at the ratio of 2:1, two pesos = one US
dollar. The gold standard is a monetary system where a country's currency or
paper money has a value directly linked to gold; countries agreed to convert
paper money into a fixed amount of gold per unit of currency.

8. The US Congress approved the Coinage Act for the Philippines in 1903.
The coins issued under the system bore the designs of Filipino engraver and
artist, Melecio Figueroa. Coins in denomination of one-half centavo to one
peso were minted. The renaming of El Banco Español Filipino to Bank of the
Philippine Islands in 1912 paved the way for the use of English from Spanish
in all notes and coins issued up to 1933. Beginning May 1918, treasury
certificates replaced the silver certificates series, and a one-peso note was
added.

9. Two kinds of notes circulated in the country during the outbreak of World
War II. The Japanese Occupation Forces issued war notes in high
denominations, which had no back up reserves, thus, Filipinos dubbed it
"Mickey Mouse" money. Guerrilla notes or resistance currencies, in low
denominations that were issued by different provinces and municipalities,
show resistance against the Japanese occupation.

10. Having gained independence from the United States following the end of
World War II, the country used as currency old treasury certificates
overprinted with the word "Victory."

11. With the establishment of the Central Bank of the Philippines in 1949, the
first currencies issued were the English series notes printed by the Thomas
de la Rue & Co., Ltd. in England and the coins minted at the US Bureau of
Mint.

12. The "Filipinization" of the republic coins and notes began in the late 60s
and is carried through to the present. In the 70s, the Ang Bagong Lipunan
(ABL) series notes printed at the Security Printing Plant were circulated
starting 1978. In 1983, the Flora and Fauna coin series was initially issued.
The New Design Series of banknotes issued in 1985 replaced the ABL series.
Ten years later, a new set of coins and notes were issued carrying the logo of
the new Bangko Sentral ng Pilipinas.

KEY TAKEAWAYS

1. Barter was the means of trade long before the Spaniards came to the
Philippines.

2. Barter was inconvenient so cowries, glossy, often colorfully patterned

shells, was adopted as a medium of exchange.

3. Barter rings, made in gold called piloncitos, were the first local form of
coinage. These had a flat base that bore an embossed inscription of the
letters "MA" or "M" believed to be the name by which the Philippines was
known to Chinese traders.

4. The cobs or macuquinas (silver coins) were the earliest coins brought in by
the galleons from Mexico and other Spanish colonies. These silver coins
usually bore a cross on one side and the Spanish royal coat-of-arms on the
other.

5. The barrilla, a crude bronze or copper coin worth about one centavo, was
the first coin struck in the country as ordered by the Royalty of Spain. The
Filipino term "barya," referring to small change, had its origin in barrilla.

6. Gold coins with the portrait of Queen Isabela were minted in Manila.

7. Silver pesos with the profile of young Alfonso XIII were the last coins
minted in Spain.
8. The pesos fuertes, issued by the country's first bank, the El Banco Español
Filipino de Isabel II, were the first paper money circulated in the country.

9. The Philippine Republic of 1898 under General Emilio Aguinaldo issued its
own coins and paper currency backed by the country's natural resources. Two
types of two-centavo copper coins were struck at the Malolos arsenal.

10. One-peso and five-peso revolutionary notes were printed as Republika

Filipina Papel Moneda de Un Peso and Cinco Pesos.

11. With the coming of the Americans in 1898, the Philippines became one of
the most prosperous countries in East Asia. The Americans instituted the
gold standard and pegged the Philippine peso to the American dollar at the
ratio of 2:1.

12. The gold standard is a monetary system where a country's paper money
has a value directly linked to gold; countries agreed to convert paper money
into a fixed amount of gold per unit of currency.

13. The US Congress approved the Coinage Act for the Philippines in 1903.
The coins issued under the system bore the designs of Filipino engraver and
artist, Melecio Figueroa. Coins in denomination of one-half centavo to one
peso were minted.

14. El Banco Español Filipino was renamed Bank of the Philippine Islands in
1912. All notes and coins issued up to 1933 used English. Beginning May
1918, treasury certificates replaced the silver certificates series, and a one-
peso note was added.

15. Two kinds of notes circulated in the country during the outbreak of World
War II-war notes in high denominations issued by the Japanese Occupation
Forces dubbed as "Mickey Mouse" money and guerrilla notes or resistance
currencies in low denominations issued by different provinces and
municipalities.

16. Old treasury certificates overprinted with the word "Victory" was used as
currency when the Philippines gained independence from the United States
following the end of World War II.

17. With the establishment of the Central Bank of the Philippines in 1949, the
first currencies issued were the English series notes printed by the Thomas
de la Rue & Co., Ltd. in England and the coins minted at the US Bureau of
Mint.

18. The "Filipinization" of the republic coins and notes began in the late 60s
and is carried through to the present.

19. In the 70s, the Ang Bagong Lipunan (ABL) series notes printed at the
Security Printing Plant were circulated starting 1978.

20. In 1983, the Flora and Fauna coin series was initially issued.

21. The New Design Series of banknotes issued in 1985 replaced the ABL
series.

22. Ten years later, a new set of coins and notes were issued carrying the
logo of the new Bangko Sentral ng Pilipinas.

DISCUSSION QUESTIONS

Instruction: Answer the following questions comprehensively.

1. Discuss the history of the Philippine currency during the pre-Hispanic era.
2. Explain the history of the Philippine currency during the Spanish era.

3. Elaborate on the history of the Philippine currency during the revolutionary

period.

4. Elucidate on the history of the Philippine currency during the American

period.

5. Discuss the history of the Philippine currency during the Japanese

occupation.

6. Explain the history of the Philippine currency during the Philippine

republic.

CONNECTIONS AND APPLICATIONS

In at least two paragraphs, write your reflections on the following aspects of

the lesson discussed earlier on a separate sheet of paper. Use the grading
rubrics in Lesson 1.1.

The History of the Philippine Currency

LESSON 1.5. Mobile Payments and Internet Payments

LESSON OBJECTIVES:

At the end of the lesson, the students should be able to:

1. explain the meaning of mobile payments;

2. discuss what point of sale is;

3. elaborate on the different methods of mobile/internet payments;

4. elucidate on the meaning of mobile wallets; and

5. discuss "auto pay" and "direct carrier billing."

The twenty-first century saw novel means of payments-mobile payments and

payments through the internet. Mobile payments are money rendered for a
product or service through a portable electronic device, such as a cell phone,
smartphone, or a tablet device. Due to our ever-increasing smartphone
dependence, various ways have been developed to allow consumers to pay
conveniently through a phone. Mobile payment technology can also be used
to send money to friends or family members. Increasingly, services like Apple
Pay and Google Pay are vying for retailers to accept their platforms for point
of sale (POS) payments. A point of sale (POS) is a place, such as a checkout
counter of a store, where a customer makes the payment for goods or
services.

The following mobile payments information came from [Link]

(2021):

Use of near field communication (NFC) payments is growing rapidly in the

UK. NFC is the technology that allows two devices-your phone and a
payments terminal-to process contactless payments. The mobile phones do
not have to touch the POS to transfer information (e.g. money), but they
have to be within a few inches of the terminal. NFC phones communicate
with NFC-enabled card machines using close-proximity radio frequency
identification. London, China, and Japan use NFC for busses, tube stations,
and public transport. Visitors and residents in Nice can use NFC to purchase
almost anything. Digital wallets using NFC for contactless card machines
include Apple Pay, Samsung Pay, Google Pay, and Android Pay.

Sound wave-based (SWB) or sound signal-based (SSB) mobile payments

represent a newer, cutting-edge solution that works for most mobile phones.
Transactions are processed without the need for internet through unique
sound waves containing encrypted data about the payment. Pay-by-sound
uses an advanced, ultra-low power, wireless transmission technology to
transmit data via sound waves that originate from the very same POS
terminals that retailers are already using. Any phone with a microphone can
pick up those waves to complete a transaction. No special features need to
be present or enabled unlike NFC, which only functions on certain phones.
Your mobile wallet, banking app, of card terminal just needs a simple
software installation. There is no need for any extra hardware. This makes it
an affordable solution especially in areas and countries where people cannot
afford the latest smartphones, but rely on more basic technology to process
payments.

Another way to pay with a mobile phone at a card terminal is through

magnetic secure transmission (MST). Samsung Pay uses both MST and NFC
payments for contactless mobile phone payments. MST is when a phone
emits a magnetic signal imitating the magnetic strip on the payer's credit
card, which the card terminal picks up and processes as if a physical card
was swiped through the machine. MST is as secure as NFC, in part because
they both use a secure tokenization system, and it is safer than using a
physically present card.

A mobile/digital wallet stores payment information on a mobile device,

usually in an app that utilizes different technologies in the payment process.
Mobile/digital wallets using NFC for contactless card machines include Apple
Pay, Samsung Pay, and Google Pay. Digital wallets are very secure to use.
They commonly work through [Link] and tokenization, a
method using time-limited token numbers generated to process the specific
transaction using your already-encrypted card "stored" in your mobile wallet.
Apart from credit and debit cards, it is also possible to attach loyalty cards,
boarding passes, tickets, and other important documents in mobile wallets.
Quick response (QR) codes are the trademark of a type of matrix barcode
(type 2D barcode) readable by smartphones created in 1994 for the Japanese
automotive industry. It has since been used in many contexts, for instance
marketing and information sharing, but it is also a popular way for people to
make mobile payments, especially since the COVID-19 pandemic started. A
QR code has four important advantages:

a. It stores a large volume of data.

b. It can be scanned from a screen, not just paper.

c. It can be read even if part of the code is damaged.

d. It is safer because information can be encrypted.

Businesses doing e-commerce use QR codes at their website checkout as an

alternative to manually entering card details. This is more secure because
your phone, that your card details are securely connected to, confirms you
are the owner of the card. You do not have to type your unencrypted card
details on a device screen.

We also have short message (or messaging) service (SMS), also called
premium SMS payments and direct carrier billing. SMS payments simply
mean paying for products or services via a text message. You send a text
message with the relevant information to the right payee phone number and
the payment amount is added to your mobile phone bill.

Direct carrier billing (DCB) is similar to SMS payments because you pay
through your mobile carrier instead of using bank or card details. You enter
your phone number on a payment page or in an app, wherein after you go
through a few authentication steps to confirm you are the owner of that
number like confirming a text message, the payment will then be added to
your phone bill or prepaid SIM card as with SMS payments.

Internet payments can be done on desktops, laptops, or even phones (as in

mobile payment). Like mobile payment technology, internet payments can
also be used to send money to friends or family members. There are several
ways to pay this way. For instance, you can manually enter card details on a
website to pay for an order (just like on a computer), automatically charge a
bank card attached to a mobile app, or use PayPal or follow a link to a digital
invoice emailed to you. Prior 2010, this was commonly referred to as wireless
application protocol (WAP) payments. WAP used to be the most common
facility on smartphones connecting to the internet. So instead of a web
browser with access to the entire internet, people paid through a more
limited-capacity WAP browser or app.

Also, most credit cards and bank accounts have what we call "auto pay,"
where payments to credit cards or other bills, like for water, electricity, or
whatever bills need to be paid, are scheduled to be automatically paid on a
certain date from funds of the payee with a certain bank. It can be the bank
doing the auto pay or the credit card company. This is very similar to mobile
banking using an app provided by the user's bank, through which you can
conduct financial transactions (peer-to-peer transfers, payments to other
people, and bill payment) directly from your bank account. This is like using a
debit card where funds are immediately deducted from the cardholder's bank
account, but there is no need for the physical card.

We also have what we call payment links or pay by link. It is most commonly
referring to a button/link sent in an email, text message, messaging app, or
over social media. When the receiver clicks the link, a checkout page opens
up in an internet browser where the recipient can enter their card details to
process a transaction for a specified merchant. The transaction total can be
set in advance by the merchant sending the link, or in some cases, entered
manually by the recipient The merchant may itemize the bill, so products are
included on the customer's digital receipt that follows or you may only see a
transaction amount with merchant details on the checkout page.
Lastly, for the technology savvy, we now have what we call neobanks. A
neobank literally means "new bank," from the Greek word neos meaning
"new." It is an umbrella term for the new generation of cutting-edge, fully
digital banking services aiming to be more accessible than traditional banks.
They all operate online or through apps; hence, they are classified as a type
of financial technology (fintech) solution. Their services include savings
account, current account, mobile apps, payment cards, money transfers,
loans, and even financial services like analytics to improve spending
behaviors.

LESSON SUMMARY

1. Mobile payments are money rendered for a product or service through a

portable electronic device, such as a cell phone, smartphone, or a tablet
device. It can also be used to send money to friends or family members.

2. Near field communication (NFC) payments is the technology that allows

two devices-your phone and a payment's terminal-to process contactless
payments using close-proximity radio frequency identification.

3. Sound wave-based (SWB) or sound signal-based (SSB) mobile payments or

pay-by-sound uses an advanced, ultra-low power, wireless transmission
technology to transmit data via sound waves that originate from POS
terminals. Any phone with a microphone can pick up those waves to
complete a transaction without the need for internet.

[Link] secure transmission (MST) is when a phone emits a magnetic

signal imitating the magnetic strip on the payer's credit card, which the card
terminal picks up and processes as if a physical card was swiped through the
machine. MST is secure as it uses a secure tokenization system.

5. A mobile/digital wallet stores paymerit information on a mobile device,

usually in an app that utilizes different technologies in the payment process.
They commonly work through complex encryption and tokenization, a
method using time-limited token numbers generated to process the specific
transaction using your already-encrypted card "stored" in your mobile wallet.
6. Quick response (QR) codes are the trademark of a type of matrix barcode
(type 2D barcode) readable by smartphones. This is more secure because
your phone, that your card details are securely connected to, confirms you
are the owner of the card.

7. A QR code has four important advantages:

a. It stores a large volume of data.

b. It can be scanned from a screen, not just paper.

C. It can be read even if part of the code is damaged.

d. It is safer because information can be encrypted.

8. Short message (or messaging) service (SMS), also called premium SMS
payments, simply means paying for products or services via a text message
with the relevant information to the right payee phone number and the
payment amount is added to your mobile phone bill.

9. Direct carrier billing (DCB) is similar to SMS payments because you pay
through your mobile carrier instead of using bank or card details, the
payment will then be added to your phone bill or prepaid SIM card as with
SMS payments.

10. Internet payments can be done on desktops, laptops, or even phones (as
in mobile payment) and can also be used to send money to friends or family
members.
11. Wireless application protocol (WAP) payments used to be the most
common facility on smartphones through a more limited-capacity WAP
browser or app.

12. Most credit cards and bank accounts have what we call "auto pay," where
payments to credit cards or other bills, like for water, electricity, or whatever
bills need to be paid, are scheduled to be automatically paid on a certain
date from funds of the payee with a certain bank. It can be the bank doing
the auto pay or the credit card company.

13. Payment links or pay by link is most commonly referring to a button/link

sent in an email, text message, messaging app, or over social media where a
checkout page opens up in an internet browser where the recipient can enter
their card details to process a transaction for a specified merchant.

14. Neobank literally means "new bank," and is from the Greek word neos
meaning "new." It is an umbrella term for the new generation of cutting-
edge, fully digital banking services. They all operate online or through apps;
hence, they are classified as a type of financial technology (fintech) solution.

KEY TAKEAWAYS

1. Mobile payments are money rendered for a product or service through a

portable electronic device, such as a cell phone, smartphone, or a tablet
device.

2. Near field communication (NFC) payments is the technology that allows

contactless payments using close-proximity radio frequency identification.

3. Sound wave-based (SWB) or sound signal-based (SSB) mobile payments or

pay-by-sound uses an advanced, ultra-low power, wireless transmission
technology.
4. Magnetic secure transmission (MST) makes use of a magnetic signal to
process payment using a secure tokenization system.

5. Mobile/digital wallets work through complex encryption and tokenization

to process specific transactions.

6. Quick response (QR) codes are the trademark of a type of matrix barcode
(type 2D barcode) readable by smartphones used in e-commerce to process
payments.

7. Short message (or messaging) service (SMS), also called premium SMS
payments, simply means paying for products or services via a text message.

8. Direct carrier billing (DCB) is similar to SMS payments where you enter
your phone number on a payment page or in an app and the payment will
then be added to your phone bill or prepaid SIM card.

9. Internet payments can be done on desktops, laptops, or even phones (as

in mobile payment).

10. Wireless application protocol (WAP) payments used to be the most

common facility on smartphones through a more limited-capacity WAP
browser or app.

11. "Auto pay" is done when payments to credit cards or other bills, like for
water, electricity, or whatever bills need to be paid, are scheduled to be
automatically paid on a certain date from funds of the payee with a certain
bank, just like a debit card.

12. Payment links or pay by link is most commonly referring to a button/link

sent in an email, text message, messaging app, or over social media to
process a transaction for a specified merchant
13. Neobank is an umbrella term for the new generation of cutting-edge, fully
digital banking services classified as a type of financial technology (fintech)
solution.

DISCUSSION QUESTIONS

Instruction: Answer the following questions comprehensively.

1. Explain the meaning of mobile payments.

2. Discuss what point of sale is.

3. Elaborate on the different methods of mobile/internet payments.

4. Elucidate on the meaning of mobile wallets.

5. Discuss "auto pay" and "direct carrier billing."

CONNECTIONS AND APPLICATIONS

In at least two paragraphs, write your reflections on the following aspects of

the lesson discussed earlier on a separate sheet of paper. Use the grading
rubrics in Lessononlin

Mobile Payments and Internet Payments

LESSON 1.6. Virtual Currency

LESSON OBJECTIVES:
At the end of the lesson, the students should be able to:

1. Explain the meaning of virtual currency:

2. Differentiate fiat money and e-money;

3. Discuss what a virtual currency exchange is;

4. Elaborate on blockchain technology;

5. Distinguish between centralized and decentralized relevant to

cryptocurrencies; and

6. Elucidate on the top six 5-star cryptocurrencies.

Cryptocurrency or virtual/digital currency has shown how the world has

become more globally connected than ever. It has given people a chance to
grow their money and build their wealth. Wall Street seemed so hesitant
about “digital gold,” a name they use to refer to cryptocurrency, to invoke a
margin of safety. Cryptocurrencies or what they call “altcoins”-are up-and-
coming coins that can be bought for cheap price. That is because it pays to
get in early. But as any experienced crypto investor knows, cryptocurrencies
are a digital “popularity contest” where winners keep winning and losers bite
the dust. For example, $1,000 invested in Ethereum’s initial coin offering
(ICO) (when the Ethereum Foundation launched the Ethereum Mainnet on
July 30, 2015) would be worth $3.3 million today ([Link] 2021).
Ethereum’s ICO participants received Ether, which is used as “gas” or “fuel”
to compensate for computations performed on the network.
Under BSP Circular No. 944’s Definition of Terms, virtual currency is “any
type of digital unit that is used as a medium of exchange or a form of
digitally stored value generated by agreement within the community of
virtual currency users.” Basically, it is a digital currency that is generally
used for online transactions. Since community users create this currency
online, it is not issued or backed by central banks or government authorities.
Virtual currencies can also be exchanged to and from fiat/cash through
different channels, mostly through virtual currency exchanges.
Cryptocurrency is digital money-it is virtual and has no physical form, unlike
our currency bank notes and coins. It is not even the money in your e-wallet
or online banking account, which are tied to real physical coins or bills.
Because cryptocurrency is purely digital, this means that you can store it
online and even in small, specially designed hardware. And since it does not
require a bank or any middleman, you can easily send your digital money to
anyone, anytime and anywhere. Virtual currencies have no physical coinage.
The appeal of virtual currency is it offers the promise of lower transaction
fees than traditional online payment mechanisms, and virtual currencies are
operated by a decentralized authority, unlike government-issued currencies.

Fiat currency/fiat money or cash, on the other hand, is the real currency.
Coins and paper money (bills) issued and printed by the central bank of a
country are fiat currency, fully-backed by the government of a country and is
acceptable as payment for public and private debts.

E-money is a digital representation of fiat currency stored in digital wallets or

e-wallets. Any amount of currency stored in an electronic wallet (such as
GCash, PayMaya, Coins PH, GrabPay, and the like) is e-money, which can also
be accepted as a "card payment" or can be withdrawn right away as cash.

Virtual currency, which is stored digitally, would still need to be converted

first to Philippine peso then transferred to a destination wallet or be
withdrawn as cash through different mediums that are accepted in the
country. In general, conversion is done through a virtual currency exchange.
Virtual currency exchanges are licensed to convert cryptocurrency to
Philippine peso and vice versa. In the Philippines, cryptocurrencies are
regulated by the Bangko Sentral ng Pilipinas (BSP). In fact, 17 virtual
currency exchanges are registered with the BSP and authorized to operate in
the Philippines. Atomtrans Tech; Betur, Inc ([Link]); B Express (Bexpro);
Bloom Solutions; and Virtual Currency Philippines, Inc. are some of the
licensed virtual currency exchanges in the Philippines ([Link] 2021).
With the country being the third largest recipient of remittances globally,
many firms are applying for a license to become a virtual currency exchange
in the Philippines. Such an exchange can deal with crypto to fiat and fiat to
crypto transactions. The BSP reported that there are a number of companies
applying to have a license to operate in the country as a virtual currency
exchange.

Over the years, cryptocurrency has been viewed either as the money of
tomorrow or a risky and rather volatile asset. However, with reputable
companies buying Bitcoin in large quantities, the general public's interest in
cryptocurrency has skyrocketed in recent years. A lot have started to think
that maybe they are a worthwhile and viable investment.

Cryptocurrencies work through blockchain technology. Blockchain is a special

kind of database, and it differs from traditional databases when it comes to
storing data. It is a "distributed ledger" built on a data structure known as
"blocks." Traditional databases are centralized, meaning only select people
can access them.

Blockchain, on the other hand, allows all participants to view the records and
all the changes that happen in the database. To better understand how
cryptocurrencies work, let us assume you buy a laptop from a shop using
cryptocurrency. Your transaction data will be stored in a block, which is
technically a list of other transactions made by other people. The block
where your transaction is listed will then be chained to previous blocks. With
this setup, you can think of blockchain as a global ledger that records all the
transactions of the people who are using the same cryptocurrency. This
ledger also makes sure that all the transactions that go to it, from past to
present and to future, are all valid ([Link] 2021). When you purchase
a cryptocurrency, you buy a fixed number of slots in a blockchain. When you
trade away your cryptocurrency, you sell your slot in the blockchain.
Cryptocurrencies use electronic coins as their form of exchange. However,
these electronic coins are nothing more than slots in the blockchain. A
transaction is considered valid only when the majority of users in the
network determine it is valid, therefore creating a complex system for
exchange that is essentially impossible to hack.

Cryptocurrencies use cryptography, the process of protecting information by

using codes. Cryptography is used for the security of cryptocurrencies. It is
also used to control transactions and increase the supply. With this feature,
cryptocurrencies have become self-governing and self-regulating. Digital
money is free from the shackles and rules of traditional banks. This allows
practically everyone to complete digital transactions without a third-party
financial institution facilitating the process. It provides routine escrow
mechanisms that could easily be implemented to protect buyers. By
principle, the cryptocurrency model is a financial system designed by the
people, for the people.

However, having no intrinsic value, there are also significant risks associated
with cryptocurrencies. Their worth comes from their users. The more users a
coin has, the more useful it becomes, and the higher its price goes.
Cryptocurrencies only serve to transfer wealth from one party to another. But
when a coin falls out of favor, there is nothing to stop it from going to zero
and that is the risk. Investing in cryptocurrency requires strong belief that
others will eventually buy it from you for even more. Today, people invest in
crypto for one reason alone: to make money. So far, cryptocurrencies have
delivered on that promise. Mom-and-pop store investors have profited
handsomely as Bitcoin and other currencies have rocketed in value. The rush
to collect cryptocurrencies continues well into 2022. If you are new to the
crypto space, you might have heard of only Bitcoin. But there are hundreds
of altcoins (or alternative cryptocurrencies) other than Bitcoin. Each altcoin
comes up with its own unique technology and vision to change the world. But
the risks in 2021 are growing with some new competitors recently popping
up.

"China has already developed a Central Bank-backed crypto, and in the US it

was discussed as part of the C-19 stimulus," writes Laura Gonzalez, Ph.D.
associate professor of finance at California State University, Long Beach.
"There is ample evidence of speculation as well, and the value of the current
cryptos will be affected by the upcoming central-bank backed digital
currencies." In other words, unregulated cryptocurrencies will one day
compete against state-sponsored ones, too. Here is the takeaway: if you
have an extremely conservative portfolio and need to add "risk-on" assets,
choosing a basket of top-rated cryptocurrencies could be right for you. It is a
cheap way to gain massive macroeconomic risk exposure. But do not get
fooled by thinking of crypto as "digital gold." If 2022 sees a surprise
economic slowdown, no amount of hope will keep crypto afloat. If you are
willing to take those risks, then you might want to start your search with the
top cryptocurrencies you need to know ([Link] 2021).

Before we discuss the top six 5-star cryptocurrencies, let us first learn the
difference between centralized and decentralized relative to digital
currencies.

The concept of decentralization is pivotal to the blockchain and

cryptocurrencies that run on it. Unlike traditional third-party payment
processors like PayPal or Mastercard, cryptocurrencies can self-verify every
transaction made by the people who use them. Whether they are using
digital coins to make purchases, accepting crypto as payment for goods and
services, or trading altcoins, every transaction performed using a
decentralized blockchain currency is performed with trust and security.
Decentralized cryptocoin markets run through a blockchain relying on a peer-
to-peer protocol. So trading altcoins is done through dozens or even
hundreds of independent nodes and masternodes. Transactions occur only
when the nodes come to a consensus based on the exchange's verification
rules. When it comes to cryptocurrency exchange websites, however,
centralization remains a core concept. Just like PayPal, centralized exchanges
are run by companies that manage and earn revenue from transactions on
the platform ([Link] 2021). To clarify, cryptos used decentralization in
their trading platforms, although there are certain crypto platforms that are
centralized. Cryptocurrency exchanges that convert cryptos into fiat money
are centralized.

The top six 5-star rated digital currencies today as ranked by Louis Navellier,
renowned growth investor, champion for individual investor, and portfolio
and dividend grader are the following ([Link] 2021):
Ethereum or Ether (ETH) was first described in a 2013 whitepaper by Vitalik
Buterin. Buterin, along with other co-founders, secured funding for the
project in an online public crowd sale in the summer of 2014 and officially
launched the blockchain on July 30, 2015. The Ethereum network, moreover,
is formed by each and every one of the computers that work verifying
operations in the blockchain, also called miners. These miners receive Ether
as a reward for executing the operations of the platform. Ether, as
cryptocurrency, can be bought in different places. The most popular is the
website Coinbase, through which you can quickly and easily create an
Ethereum wallet and start trading with Ether. Figure 1.10 shows an image
depicting Ether/Ethereum.

While Ether is a relative newcomer, has risen up the ranks, thanks to its
superior technology and its ability to create "smart contracts. It is the
cryptocurrency of the Ethereum blockchain, a technologically advanced
version of Bitcoin, that stands to grow even faster. That makes it more like
Google Wallet or Apple Pay-a system that can approve or delay transactions
based on real-world events. Online buyers and sellers, for instance, could set
up trades that only follow through when the postal service independently
verifies the delivery of goods. The amount of Ethereum held on decentralized
exchanges and platforms is now almost twice as much as what is available
on centralized exchanges like Binance, Coinbase, or FTX. Since the start of
2020, the amount of Ether on centralized exchanges has fallen by 30% while
locked Ether on DeFi protocols is up 75% over the same period.
Ether/Ethereum is the second (to Bitcoin) largest cryptocurrency based on a
market capitalization of approximately US$ 200 billion and one Ether costs
around US$ 2,494 (approximately P117,218). The cost per transaction is US$
10 and it registered a 470% return in 2020.

Figure 1.10. Ether/Ethereum (ETH)

Bitcoin (BTC) is the most widely adopted cryptocurrency. Many investors and
experts consider Bitcoin to be the first and original cryptocurrency. Bitcoin
has decentralized digital currencies and created a disruption in the financial
world. Although it is not the most technologically advanced, it continues to
lead the pack. Many call Bitcoin the gold cryptocurrency. It was released in
2009 by the pseudonymous Satoshi Nakamoto (we really do not know who
he is or, could be, who they are) and quickly became the standard for virtual
currencies.

Fig. 1.11. Bitcoin (BTC)

According to the pseudonymous Nakamoto ([Link] 2021),

What is needed is an electronic payment system based on cryptographic

proof instead of trust, allowing any two willing parties to transact directly
with each other without the need for a trusted third party. Transactions that
are computationally impractical to reverse would protect sellers from fraud…
The system is secure as long as honest nodes collectively control more CPU
power than any cooperating group of attacker nodes.

Bitcoin has the largest market capitalization of approximately US$ 920

billion. A single coin currently costs over US$ 38,900 (that is equivalent to
more than PHP 1.8 million)! The cost per transaction is US$ 15 and it posted
a 309% return in 2020.

0’>Ripple (XRP), better known as XRP, is the “odd duckling” of the

cryptocurrency world, but XRP is the largest currency to have 10x potential
for 2021. Compared to Bitcoin and other cryptocurrencies, XRP transactions
are much faster and cheaper. These include the ability to negotiate with
large banks and execute trades quickly. And its low price-per-coin makes it a
tempting target for gamblers/punters. XRP is the fourth largest in terms of
market capitalization of over US$ 24 billion, is priced at US$ 0.8779 per coin,
and the transaction cost is very nominal. It registered a 2020 return of 16%.

Figure 1.12. 0’>Ripple (XRP)

XRP is a centralized cryptocurrency founded in 2012, mined, managed, and

administered by Ripple Labs used by the Ripple payment network (instead of
a broad-based community). This does not just have the potential to help
everyday consumers; financial institutions themselves are also keen to get in
on the action. An impressive list of banks and payment providers use its
network, including American Express, Bank of America Merrill Lynch, HSBC,
Barclays, Royal Bank of Scotland, Santander, Unicredit, and MoneyGram
([Link] 2021). Visa (NYSE:V) also uses the XRP network together with
other centralized payments processors. Built for enterprise use, XRP aims to
be a fast, cost-efficient cryptocurrency for cross-border payments. Ripple has
its sights set on the international transfer market. Banks charge astronomical
fees. XRP is designed to tackle this by allowing large sums of money to be
sent securely and quickly at little cost. This goal was achieved because, as
we had stated, several banks and payment providers are now using its
network. It is a centralized cryptocurrency that is geared toward getting rid
of the high costs, of inter-bank transfers. The currency is used by financial
institutions as an alternative to the Society for Worldwide Interbank Financial
Telecommunications (SWIFT) network, giving it a real-world application.
SWIFT is a vast messaging network used by banks and other financial
institutions to quickly, accurately, and securely send and receive information,
such as money transfer instructions. The SWIFT payment standard prescribes
the rules and regulations that all participants in the international payment
network must abide with to ensure that there is a common standard of
messaging and communication between the banks and other financial
institutions.

STELLAR

Stellar (XLM) is a well-placed contender to XRP's crown. It offers low-cost,

cross-border transactions. It was developed by the Stellar Development
Foundation. 2021 was to become Stellar's year. After lagging Bitcoin in 2020,
Stellar surprised analysts and investors alike by rocketing 200% in the first
week of January. The coin has continued to outperform expectations since.
Stellar is the fifth biggest in the top six 5-star cryptos in terms of market
capitalization with an approximate market capitalization of US$ 7.7 billion.
Each coin costs US$ 0.3349 and the transaction cost is nominal. It showed a
2020 return of 189%.

Figure 1.13. Stellar (XLM)

Established in 2014, much of its success comes from XRP's misfortunes.
Much like XRP, Stellar was designed to facilitate cross-border transactions. As
regulatory issues mount for rival XRP, Stellar has quickly moved to fill the
void. But some of it has also come down to luck. In January, the Office of the
Comptroller of the Currency (OCC) allowed banks to start using independent
node verification networks. The same week, the Ukrainian government
announced a partnership with Stellar Development to create a national
digital currency. All of these grant perfect investment conditions for Stellar, a
top cryptocurrency for 2021.

Cardano (ADA) is one of the largest third-generation cryptocurrencies, and it

is packed with plenty more upside potential in 2021. Third-generation
cryptocurrency may also be called Blockchain 3.0. ADA, which runs on the
Cardano network, was established in 2017. It is one of the most
technologically exciting cryptocurrencies to date. And its use of smart
contracts means that it can keep track of transactions like Bitcoin while
handling payments like Ethereum. In short, it is a third-generation coin that
improves on its predecessors. Its proof of stake system means it can operate
more efficiently than the standard proof of work system.

The main difference between the two systems is that proof of work (PoW)
requires burning an external resource (mining hardware), while proof of stake
(PoS) does not. Proof of work criticizes that if price/Bitcoin rewards/fees drop,
then fewer people have incentives to mine. This, in turn, reduces the security
of the system. Proof of stake states criticizes that since it is free to stake/add
new blocks to the Blockchain, you could use it to stake several similar coins
at the same time.

Figure 1.14. Cardano (ADA)

ADA is the fourth largest of the top six 5-star cryptos based on market
capitalization, It has an approximate market capitalization of US$ 27 billion,
each coin costs US$ 1.56, and the transaction cost is 7 cents. It registered a
2020 return of 441%. ADA still has plenty of work to do in the year ahead.
After all, having a superior technological product means nothing if people will
not adopt it.
Three key areas make it a top cryptocurrency for 2021. First, ADA has
momentum. The currency took just three years to hit a $10 billion market
cap-one-third the time it took Bitcoin to do the same. Second, it sits at just
US$ 1.56 per coin, making it a tempting target for punters to run up. Finally,
it has the ability to handle transactions and smart contracts. This makes it a
natural enhancement for other cryptocurrencies like Bitcoin.

DOHZH-Dogecoin (/doo(d)3koin/koyn or DOHJ-koyn, code: DOGE, symbol: Đ)

is an internet meme turned cryptocurrency, teaching the world about making
money. In 2013, IBM (NYSE:IBM) software engineer Billy Markus and Jackson
Palmer decided to create a payment system as a joke, making fun of the wild
speculation in cryptocurrencies at the time. Dogecoin was originally created,
at least in part, as a lighthearted joke for crypto enthusiasts, and took its
name from a once-popular meme. A meme is an idea, behavior, style, or
usage that spreads from

Figure 1.15. Dogecoin (DOGE)

person to person within a culture. Memes (discrete units of knowledge,

gossip, jokes, and so on) are to culture what genes are to life.

Despite this unusual origin story, it has exploded in popularity in 2021 and
despite its satirical nature, some consider it a legitimate investment
prospect. DOGE is a cryptocurrency featuring a likeness of the Shiba Inu dog
from the "Doge" internet meme as its logo and namesake. It was introduced
on December 6, 2013, and quickly developed its own online community.

DOGE has become the fifth largest cryptocurrency by market capitalization of

US$ 41 billion costing 3 cents per transaction with each coin costing US$
0.3175. It registered a 2020 return of 118%.

Today, Dogecoin is no joke, having exploded in value and gained more than
5,000% in 2021. And like most memes, Dogecoin saw its 15 minutes of fame.
In 2017, DOGE briefly rocketed 85,000% as the internet found its new
amusement; it subsequently lost 98% of its value. But in the world of
cryptocurrencies and memes alike, second acts do exist. In December 2020,
Tesla (NASDAQ:TSLA) CEO Elon Musk sent Dogecoin back up 200% in a week
simply by tweeting about it, calling Dogecoin his favorite cryptocurrency
([Link] 2021).

As 2021 rolls around, this newfound popularity could send the coin up to
speculative heights. Dogecoin does have its merits: its faster block time
makes it better at processing payments than Bitcoin can. But in an asset
class where popularity trounces usability any day of the week, Dogecoin
could quickly return 1,000%.

Below is a table showing basic details relative to the top six 5-star
cryptocurrencies we discussed:

Table 1.1. Top Six 5-Star Cryptocurrencies

The cryptocurrency market has grown unprecedentedly big. There are

currently more than 7,800 cryptocurrencies in circulation today. They range
in aspects such as type, use, and value. Many of them are not popular on a
large-scale and most popular cryptocurrencies account for more than 80% in
the industry ([Link] 2021).

LESSON SUMMARY

1. Cryptocurrency or virtual/digital currency is any type of digital unit that

is used as a medium of exchange or a form of digitally stored value
generated by agreement within the community of virtual currency
users. It is referred to as “digital gold.” It is also called “altcoins.”
Cryptocurrency is digital money-it is virtual and has no physical form.

2. Fiat currency or cash, on the other hand, is the real currency. Coins and
paper money (bills) issued and printed by the central bank of a country
 are fiat currency, fully-backed by the government of a country and is
acceptable as payment for public and private debts.

3. E-money is a digital representation of fiat currency stored in digital

wallets or e-wallets. Any amount of currency stored in an electronic
wallet (such as GCash, PayMaya, Coins PH, GrabPay, and the like) is e-
money, which can also be accepted as a “card payment” or can be
withdrawn right away as cash.

4. Virtual currency, which is stored digitally, would still need to be

converted first to Philippine peso, then transferred to a destination
wallet or be withdrawn as cash through different mediums that are
accepted in the country. In general, conversion is done through a
virtual currency exchange. In the Philippines, cryptocurrencies are
regulated by the Bangko Sentral ng Pilipinas (BSP).

5. Cryptocurrencies work through blockchain technology. Blockchain is a

special kind of database, a “distributed ledger” or a “global ledger”
built on a data structure known as “blocks.” Blockchain allows all
participants to view the records and all the changes that happen in the
database. Your transaction data will be stored in a block, which is
technically a list of other transactions made by other people. The block
where your transaction is listed will then be chained to previous blocks.
Cryptocurrencies use electronic coins as their form of exchange, which
are nothing more than slots in the blockchain.

6. Cryptocurrencies use cryptography, the process of protecting

information by using codes, for security. It is also used to control
transactions and increase the supply. With this feature,
cryptocurrencies have become self-governing and self-regulating. It
provides routine escrow mechanisms that could easily be implemented
to protect buyers.
7. However, having no intrinsic value, there are also significant risks
associated with cryptocurrencies. Their worth comes from their users. The
more users a coin has, the more useful it becomes, and the higher its price
goes. Cryptocurrencies only serve to transfer wealth from one party to
another. But when a coin falls out of favor, there is nothing to stop it from
going to zero and that is the risk.

8. China has already developed a Central Bank-backed crypto, and in the US

it was discussed as part of the C-19 stimulus. In other words, unregulated
cryptocurrencies will one day compete against state-sponsored ones, too.

9. Decentralized cryptocoin markets run through a blockchain relying on a

peer-to-peer protocol. So trading altcoins is done through dozens or even
hundreds of independent nodes and masternodes. Transactions occur only
when the nodes come to a consensus based on the exchange's verification
rules.

10. When it comes to cryptocurrency exchange websites, however,

centralization remains a core concept. Centralized exchanges are run by
companies that manage and earn revenue from transactions on the platform.

KEY TAKEAWAYS

1. Cryptocurrency, virtual/digital currency, "digital gold", or "altcoins" are any

type of digital unit that is used as a medium of exchange or a form of
digitally stored value generated by agreement within the community of
virtual currency users.

2. Fiat currency/fiat money or cash is the real currency, coins and paper
money (bills) issued and printed by the central bank of a country.

3. E-money is a digital representation of fiat currency stored in digital wallets

or e-wallets.
4. Virtual currency, which is stored digitally, would still need to be converted
first to Philippine peso, then transferred to a destination wallet or be
withdrawn as cash through different mediums that are accepted in the
country done through a virtual currency exchange.

5. Cryptocurrencies work through blockchain technology. Blockchain is a

special kind of database, a "distributed ledger" or a "global ledger" built on a
data structure known as "blocks."

6. Cryptocurrencies use electronic coins as their form of exchange, which are

nothing more than slots in the blockchain.