Hey there hive-bees. I hope all is well to you all! This should be a first for me ranting I mean writing about things related to finance. I am a bit skeptical telling story about how good i am in finance department of my life but I drunk a lot of instant coffee to start my too good to be true knowledge about finance. Ok lets be more specific, I am going to start my blog regarding Traditional Finance way way back before I was born. So we are going to take a glimpse on how our ancestor manage their money or whatever means they used that involves Traditional Finance based on history. I will be honest, this information will be summarized coming from internet as a reference since manually looking for books will be out of my options. Main reason? Libraries are always under construction here in my area so I can't find any nearby. If you ask me if I have any books regarding this topic, no, none and never. All my books already fueled some fire for cooking.
Traditional Finance (TradFi)
I bet most of the guys here in the community probably are already knowledgeable about the Traditional Finance definition and how it works. Well let me share to you, you young ones on this area of expertise like myself, what I understand about traditional finance.
It is a Financial System that was protected by law, overseen by the intermediaries such as insurance company or banks etc., and mostly they are Fiat-currency based that were government issued and regulated. So those mentioned are some of possible characteristics of how TradFi operates.
So where the Traditional Finance came from?
Let's say it came from evolution from time to time. Before there is Traditional Finance, there are certain financial system or alike exists from way way back that our ancestors used on their trading system that was based on historians.
Here are some examples of trades that was recorded in the history. I believed these history also because I remember them being thought in school since I am not absent when our teacher discussing them.
I am not going in to deep with the financial discussions of early days for verifying those will just make our head ache. I will just sight the most very basic understanding with the old financial system. Here it goes.
Barter System - Before money or fiat even born in this world, exchanging products that agreed by both parties are the basic means of transaction. A grain of salt for a cattle will be possible for this outcome if ever they agreed upon.
Temple Based Banking - Wealth was stored in Religious Temple before. They act as safe or bank for the wealthy. What else is there they should be afraid of? They under the protection of the house of god.. right?
The start of Merchant Banking and Money Changers - a prototype of early banking is being developed. It is where money are already introduced and money changers are also getting known.
Informal Credits - So yeah, even maybe the time of dinosaurs, even this type of borrowing something is already present. Informal here means that they are borrowing money to other type of institutions outside of the templars or probably wealthy individuals then collaterals was also known this time around.
Early Regulatory Systems and Merchant Guilds - Probably is where the time that Traditional Finance will be born after the time of this Regulatory Systems. Merchant guilds also play a good part in constructing the Traditional Finance since merchant's are always related to money, a good share of knowledge and experience to form a good financial system.
- So based on what history tells us, Traditional Finance came from evolution from time to time. Correction was being made to the old systems and laws are introduced to protect the system. Laws are important to protect its participants(borrowers, lenders, etc.). So right now, we are living under the Traditional Finance system and at the same time where new form of finances are being introduced. Its just up to us to what should we believe in.
Disclaimer:
Images where generated from ChatGPT and some features where edited from Canva.