The beads of wampum, generally purple and white in color, were made by rounding small pieces of the shells of mussels, then piercing them with a hole before stringing them. Loose beads were not considered of high value. Rather it was the belts themselves that were considered as currency. A typical large belt of six feet in length might contain 6000 beads or more.
With stone tools the process was labor intensive, and the shells were available only to coastal tribes. These factors increased its scarcity and consequent value. Wampum had enough importance to coastal and nearby interior tribes that it is featured in the Coat of Arms of New Brunswick for the Canadian Province.
In the area of present New York Bay, the clams and whelks used for making wampum were found only along Long Island Sound and Narragansett Bay. The Lenape name for Long Island was "Sewanacky", reflecting its connection to wampum. By the time of the arrival of the Europeans, the Pequots used their dominance of tribes around this area to gain control of the sources of the beads.
In 1609, Henry Hudson received a wampum as a gift from upriver Indians. The first European credited with discovering the significance of wampum was Jacob Eelkes, a Dutch fur trader in the New Netherland colony. In early 1622, Eelkes seized a sachem of the Pequot on Long Island and threatened to cut off his head unless he received a large ransom. The sachem gave Eelkes wampum of over 840 feet in length, which Eelkes discovered would command many more pelts in trade among the Indians than European-made goods.
As a result, the two-trade system for the purchase of pelts quickly supplanted direct barter methods. The Dutch began both accepting and distributing wampum as a currency at their trading stations. They began an aggressive campaign of buying as much wampum as possible from coastal Algonquins and transporting it up the Hudson Valley, where it was scarcer, to trade for pelts among the Mahicans.
The sudden growth of wealth of Mahicans, who were considered a peaceful people by the Europeans, soon brought them into conflict with the Iroquois tribes of present-day upstate New York, resulting in the Mohawk-Mahican War.
Word of the value of wampum was spread to English settlers in Massachusetts by Isaak de Rasieres, the chief commercial agent of the Dutch West India Company, who informed Governor William Bradord of the Massachusetts Bay Colony of the significance of the belts.
The system of wampum trading did not survive long after the arrival of Europeans. The European introduced metal tools, specifically rasps and steel drills that greatly reduced the labor needed to manufacture wampum. Additionally, the English in the Massachusetts Bay Colony began to manufacture wampum on their own. The resulting decrease in wampum's trade value became one of the issues that led to the Pequot War.