Before the emergence of physical currency, exchange of goods and services primarily relied on three modes:
- debt (trust based, owed at a later time)
- redistribution (centralized collection and distribution by temples or palaces), and
- gift exchange (creating reciprocal obligations).
Debt
David Graeber proposes that money as a unit of account was invented when the unquantifiable obligation “I owe you one” transformed into the quantifiable notion of “I owe you one unit of something”. In this view, money emerged first as money of account and only later took the form of money of exchange. source: History of money
I’m guessing forms of ledgers. Something like, you did me this favour and I owe you this. I gave you this and and you owe me. Credit and debt. This was recorded in ledgers made of wood, or clay.
Later the ledger entry changed into “I owe you 5 units of silver” instead of “I owe you 2 sheep”. But no silver was actually exchanged, it just existed on record. You repay the debt in actual goods, like sheep or some other goods equivalent to 5 units of silver.
In ancient England they used tally sticks - notches were made on the stick that represented the debt owed. It was split into half along its length and the debtor and creditor would take each half. It acts a as a proof of transaction - and basically fit each other like 2 jigsaw pieces which was used to prove authenticity.
The early credit/debt system was built on trust and was only applicable within tightly knit communities.
Anthropologists like Graeber says that money emerged first as accounts of credit/debt and only later acquired the functions of a medium of exchange and a store of value.