Around 1000 BC, the first coins were minted in Lydia (present-day Turkey). These coins were made of electrum, a naturally occurring alloy of gold and silver. Coins quickly became the preferred form of money because they were more portable and durable than commodity money.
The use of paper money, or banknotes, originated in China during the Tang Dynasty (618-907 AD). Initially, banknotes were used as a form of credit, but they eventually became a legal tender. Paper money spread to Europe in the 13th century and became widely used by the 16th century.
The modern concept of money, as a unit of account, a medium of exchange, and a store of value, emerged during the 18th century. This concept was formalized by the classical economists, who developed theories of money supply and demand. The modern monetary system is based on fiat money, which is money that is issued by a government and not backed by any physical commodity.