The Iron Age Kingdom of Lydia, located in what is today western Turkey, is hardly a household name, especially compared to its neighboring Greek and Persian contemporaries. Yet as far as we know, the Lydians were the first and only people to invent money as we know it: a standard, universally-accepted medium of exchange whose value is backed by a recognized authority.
Invented sometime in the seventh or sixth centuries B.C.E., Lydian coins were of high quality and stamped with the sigil or image of their ruler, allowing even the illiterate to recognize them as legitimate legal tender. They facilitated commerce between strangers by allowing them to make transactions without needing to barter goods or weigh some commodity like gold. Coins also made it far easier to travel long distances to buy things, rather than lug around cattle, gold, wheat, or some other valuable commodity.
As a result, Lydia also saw the earliest, if not first, recorded development of retail shops, as well as the services industry (including prostitution) and gambling (including the possible invention of dice). The subsequent ease of trade and commercial activity made the kingdom among the richest in the ancient world; there even remains a saying among Greeks, Turks, and others in the region for someone who is wealthy: “As rich as Croesus”, after one of the last and wealthiest rulers.
Perhaps unsurprisingly to us, Lydia soon became corrupted by the mass generation of wealth. Its ruling classes became more concerned with what we would call “conspicuous consumption”, hoarding and spending all the money they could do outdo each other. This misallocation of funds gradually weakened the kingdom and its military, such that it was easily defeated by Cyrus the Great of Persia in the mid-sixth century B.C.E.
It is believed that Cyrus’ mighty Achaemenid Empire—which stretched from southeastern Europe to the edges of what is today Pakistan—was the conduit through which the Lydian idea of money spread. Quite the legacy for an otherwise obscure and forgotten civilization.
Source: Weatherford, J. McIver, The History of Money: From Sandstone to Cyberspace