Going by the legends, the expression or name 'Canada' is believed to have derived from the Iroquois-Huron (the natives who inhabited the region before it was invaded by European powers) term 'kanata', which when literally translated denotes 'village' or an 'inhabitance'. Hence, it is appropriate to commence the history of the Canadian dollar with the 'money' used by Canada's First Nations - the regime of the native Iroquois and the Huron. It is important to note here that the indigenous peoples inhabiting the eastern region of North America held strings and belts made from beads of white or purple shells found on the eastern shores in very high esteem. Such items were called as 'wampum' by the early Englishmen who established their colonies in the region. The expression 'wampum' is an abbreviation of an Algonquin term that is occasionally spelt as 'wampumpeague'. On the other hand, the early French colonists named these beads as 'porcelaine'.
The basic reason why the 'wampum' was greatly appreciated by the Aboriginal peoples inhabiting the region comprising Canada partially owing to the fact that despite the availability of the European tools in the 17th century, it was extremely difficult to make such shell beads. According to one approximation, these indigenous people took around 119 days to manufacture wampum - a belt comprising 5,000 such beads. Compared to the belts and strings made from white beads, those manufactured with white beads were considered to be of double value as it was more difficult to work with purple beads and hence the demand for the later was more.
It is important to note that the 'wampum' is especially related to the Iroquois states and finds notable representation in the myths involving the setting up of the Iroquois Confederation or alliance among the tribes of this indigenous inhabitants of the region now called Canada. In fact, Jacques Cartier and Samuel de Champlain have mentioned the use of such shell beads by the Aboriginal peoples residing along the banks of the St. Lawrence River in the 16th century and the initial phase of the 17th century respectively. Actually, the early settlers from Europe in this region considered the 'wampum' to be a form of currency.
As the early European settlers in Canada made use of the shell beads to acquire hides of the beavers from the Iroquois and other inhabitants of the region, the wampum turned out to be an indispensible element of fur trade. If seen in the right perspective, the wampum possessed all the characteristics of an effectual currency. As it was not easy to make these beads and produce them in suitable dimensions, the wampum was in great demand among the native inhabitants. Hence, for a while during the middle of the 17th century, the wampum was treated as a legal tender in New England, the colony set up by the English in the region. According to the records available from that period, eight white beads or four purple beads were considered to be equivalent to the value of one penny in that era. The importance of the wampum grew to such an extent that a law was passed in Lower Canada in 1792 permitting the import of wampum for carrying out trade with the native inhabitants of the region.
Although the wampum gradually assumed importance as a medium for carrying out local trade, the value of these beaded belts and strings was much more than just a form of money to the native tribes inhabiting the eastern regions of North America. In fact, the Aboriginal peoples of the region attached significant figurative and ritualistic value to the wampum. The Aboriginal peoples of eastern North America had a society that was oral by nature and in this milieu the wampum is believed to have played a major role in communicating messages as well as to reinforce agreements between the different Red Indian communities and the Europeans who established early colonies in the region. In addition, the local inhabitants also exchanged the wampum during their marriage and funeral ceremonies as well as in their religious services.
However, as the years passed, the use of the wampum became gradually neglected. For instance, they were no longer in use in diplomatic or other ceremonies by the middle of the 19th century. Nevertheless, some reports from the era suggest that the wampum was still in use during funeral ceremonies of the Iroquois people till as late as the 20th century. It is interesting to note that after a lapse of several decades, the use of the wampum has once again been started afresh during the recent times.
So far we have been discussing about the importance of the wampum to the natives in the eastern North America, but it is significant to note that such shell beads were also esteemed by the people on the west coast of the continent. For the Haidas, the natives inhabiting the west coast, shield made of copper were considered to be the highest representation of wealth or prosperity. Nearly all prominent community chiefs usually owned a number of such copper shields and they were frequently exchanged at high values on occasions such as the 'potlach' ceremonies. Like the Aboriginal peoples in the eastern coast valued the wampum most, people inhabiting the north-west coast of the continent held copper shields and other articles made from copper in high esteem and they were a crucial part of the culture of the inhabitants in this region.