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The first settlers of Yap came from Eastern Indonesian or the Philippines some time before 1500 B.C. and over the centuries developed an intricate society based upon a complicated caste system with at least seven ranked tiers. An entire village would have a particular rank in the caste hierarchy and would move up or down depending on their success or failure in conflicts between villages. Lower ranked villages would have to pay money to higher ranked villages and sometimes faced dietary restrictions because of their caste level (i.e. the higher cast villages would forbid them from eating the best fish from the sea). The village ranking system was fluid, with villages moving up and down either quickly or over many years, until the Germans took power in the late 19th century and codified the caste ranking they found when they arrived.
The first colonial settlers of Yap were actually thirteen Spanish Catholics who started a mission in 1731. By the time a ship arrived in 1732 with fresh supplies the locals had dispensed with all the foreigners. Westerners took the hint and stayed away for almost 140 years, until 1871 when an American named David Dean O’Keefe shipwrecked on Yap and spurred a Westernization of the islands’ economy by starting the copra trade.
For many years the Spanish and Germans disagreed over which of them owned Yap. The dispute came to a climax in August, 1885 when, according to the excellent VisitYap.com “Timeline of Yap’s History, “two Spanish ships arrive with a governor, two priests, soldiers, convict laborers, horses, water buffalo, cattle and stones for a governor’s house and a mission. Four days later, the German gunboat Litis drops anchor and a small party races ashore to raise a German flag and claim the island–just prior to the formal colonization ceremony the Spanish are planning.” Take that, Spain! In 1886 the Pope actually decreed the islands should be Spanish but the Germans should be able to trade there. In 1899, having fallen on hard times, the Spanish actually sold Yap, and the rest of the Caroline Islands, of which they were a part, to Germany. (All this wrangling went on unbeknownst to most Yapese, who at the time didn’t know, or probably care, they were the object of such international intrigue.) In 1914 the Japanese occupied Yap and in 1919 the Treaty of Versailles gave them control. They settled rapidly and held Yap tight, especially through preparations for World War II, during which they forced the Yapese into labor gangs. The U.S. didn’t invade all of Yap during World War II, though they did take the island of Ulithi and used it to anchor about 1,000 ships. After the War the U.S. took over and today Yap is part of the Federated States of Micronesia, which have the same “Compact of Free Association” with the United States as Palau.
In addition to being known as a group of islands still rich in Micronesian culture, Yap is still well known for its unique practice of using stone money. Starting in ancient times Yapese sailors mined shiny quartz-like stones from islands far away, such as Palau, and brought them back to Yap to use as money. Some of the stones were tiny but most were large and cumbersome, some stretching several feet across. Because obtaining them was quite difficult these early stones kept a high value and only served as a medium of exchange for substantial purchases. When people bought something with stones they might physically give them to the person who sold them the object in question, though with the larger stones in particular the stone would stay sitting exactly where it was and everyone would just understand it had changed owners.
 In 1871 David O’Keefe, mentioned above, who legend has it was running from the law in Georgia, was shipwrecked while on a pearl diving expedition and ended up in Yap. A German boat took him to Hong Kong, but he returned not too long thereafter with a plan. O’Keefe realized that if he could obtain enough stone money he could buy whatever he wanted in Yap. He therefore employed Yapese laborers, sailed with them to Palau, mined large quantities of stones and used them on Yap to buy copra, which he sold for a profit. This influx of currency changed the Yapese economy, devaluing the currency, especially the stones from O’Keefe’s stash. O’Keefe did make a fortune though, bought a Yapese island and declared himself king and took at least one Yapese wife (apparently to supplement his wife back home in Georgia). In 1901 the strange reign of King O’Keefe ended when he disappeared at sea.
Today the Yapese use the U.S. dollar as their currency, though they do still use stone money in some cultural or traditional transactions. (This is Yapese stone money | NPR’s take on stone money | More about O’Keefe: “The Man Who Was Reputed to be King”
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