This is a nice theory, but doesn't really hold up in practice. For bartering to work, the other party has to hold an interest in what you have, a $1 bill and $1 cigarette are not interchangeable in that sense. If you want to buy bread but the baker doesn't smoke, what good would your cigarettes do for him?
And one 1k diamond can probably be exchanged for 50 packs of cigarettes...
And one $20 pack of cigarettes can be split into 20 $1 cigarettes...
Sure - it isn't quite as easy as cash, but it doesn't seem far off...