Writing at mid-fifth century b.c. the Greek historian Herodotus in his History observes of the Lydians, “So far as we have any knowledge, they were the first nation to introduce the use of gold and silver coin, and the first who sold goods by retail.” Subsequent research suggests that China may have edged out Lydia as the birthplace of round coins, but Lydia still receives priority for beginning the coinage of money that has evolved down to the present day. The date when Lydia hammered or struck the first true coins cannot be identified with certainty, but was probably around 800 b.c.
The kingdom of Lydia lay on the western coast of what is now Turkey, separated from ancient Greece by the Aegean Sea. Sardis, the capital of Lydia, was a clearinghouse for trade between Mesopotamia and Greek cities along the coast. According to Herodotus, “Lydia, unlike most other countries, scarcely offers any wonders for the historian to describe, except the gold dust, which is washed down from the range of Tmolus” (Herodotus, 1952). According to Greek myth the river Pactolus, near Sardis, owed its rich deposits of gold to Midas, who bathed in it to wash away his fateful golden touch that even turned his food to gold. Lydian rivers washed a natural amalgam of gold and silver down from the mountains, and left deposits of silt that the Lydians panned, capturing a light yellow precious metal that was called electrum because of its amber cast. Later the Lydians learned to separate the gold and silver content of electrum. They also substantially advanced the art of ascertaining the gold content of metal.
The main purpose of the first coins was to facilitate trade by providing state authentication of the purity and weight of precious metals, an important medium of exchange. The ancestor to the Lydian coins was a bean-shaped dump of electrum that served as Lydian coins at the opening of the seventh century. Soon these dumps acquired a punch mark on one side and, later, an inscribed mark on the other side, signifying that the government vouched for the purity and weight of the precious metal content. By midcentury these dumps began to take on the characteristics of round coins, stamped on both sides with clearly identifiable figures. One side of the coins bore the resemblance of a lion’s head, the symbol of the ruling Mermnad dynasty of Lydia.
The development of coinage in Lydia did not end the production of gold bars of uniform size. Herodotus (1952) tells of a Lydian king, Croesus, who, a century after the appearance of the first coins, caused “a vast quantity of gold to be melted down, and ran it into ingots, making them six palms long, three palms broad, and one palm in thickness.”
From Lydia the production of finished coins passed to Greece, where it developed very rapidly. Athens was minting coins by 575 b.c. and by the fifth century b.c. minted coins in Greece had come to rival other art forms in their beauty. From Greece the coinage of money passed to Rome and Western Europe and for the next 2,000 years money to most people in the Western world meant coins. By the twentieth century, Western Europe had spread the practice of coining money to the rest of the world, making coinage one of the epochal innovations in financial history.
