A Graphic Timeline of the History of Money

Money has been used for something like 3000 years. City-states in the ancient near east had extensive trade from city to city, and they used precious metals as a medium of exchange. When trades were settled a certain amount of metal could be used to settle the difference. There was a problem of quality control, however. There were problems of determining that the quantity and purity of the metal was as agreed.
The answer was quality control and certification. The early kings of Lydia standardized the hunks of metal and guaranteed their quality by stamping the king's picture on them. These were the first coins. This guarantee of quality by the Lydian kingdom -- already a rich and powerful one -- was very successful, and made the Kingdom of Lydia even richer, indeed proverbially rich. Croesus and Midas -- of all kings the most proverbially wealthy ones -- were among the kings of Lydia.

But what Lydia could do, other kingdoms could also do. By 1000 AD, metallic coin monetary systems had spread through much of the old world.

As in so many other things, the Chinese were the innovators for the next step. The Chinese invented printing, and not too much later, they also invented paper money. It was widespread in China by around 1000 AD, but the Chinese abandoned it after about 1500, in the general decline of Chinese society after the Mongol conquest.