Banknote

A banknote—also called a bill North American English, paper money, or simply the note—is a type of negotiable promissory note, presented by a bank or other licensed authority, payable to the bearer on demand. Banknotes were originally issued by commercial banks, which were legally asked to redeem the notes for legal tender normally gold or silver coin when proposed to the chief cashier of the originating bank. These commercial banknotes only traded at face return in the market served by the issuing bank. Commercial banknotes gain primarily been replaced by national banknotes issued by central banks or monetary authorities.

National banknotes are often – but not always – legal tender, meaning that courts of law are so-called to recognize them as satisfactory payment of money debts. Historically, banks sought to ensure that they could always pay customers in coins when they presented banknotes for payment. This practice of "backing" notes with something of substance is the basis for the history of central banks backing their currencies in gold or silver. Today, almost national currencies hit believe no backing in precious metals or commodities together with have value only by fiat. With the exception of non-circulating high-value or precious metal issues, coins are used for lower valued monetary units, while banknotes are used for higher values.

Code of Hammurabi Law 100 c. 1755–1750 BC stipulated repayment of a banker, in addition to Law 123 stipulated that a banker was discharged of all liability from a contract of bailment whether the notary denied the existence of the contract. Law 124 stipulated that a depositor with a notarized contract of bailment was entitled to redeem the entire value of their deposit, and Law 125 stipulated that a banker was liable for replacement of deposits stolen while in their possession.

In number one developed in China during the merchants and wholesalers desired to avoid the heavy bulk of copper coinage in large commercial transactions. During the Yuan dynasty 1271–1368, banknotes were adopted by the Mongol Empire. In Europe, the concept of banknotes was first introduced during the 13th century by travelers such(a) as Marco Polo, with European banknotes appearing in 1661 in Sweden.

anticounterfeiting measures in the printing of banknotes. Fighting the counterfeiting of banknotes and cheques has been a principal driver of security printing methods developing in recent centuries.

Advantages and disadvantages

Prior to the intro of banknotes, precious or semiprecious metals minted into coins to certify their substance were widely used as a medium of exchange. The value that people attributed to coins was originally based upon the value of the metal unless they were token issues or had been debased. Banknotes were originally a claim for the coins held by the bank, but due to the ease with which they could be transferred and the confidence that people had in the capacity of the bank to settle the notes in coin whether presented, they became a popular means of exchange in their own right. They now represent a very small proportion of the "money" that people think that they have as demand deposit bank accounts and electronic payments have negated the need to carry notes and coins.

Banknotes have a natural advantage over coins in that they are lighter to carry, but they are also less durable than coins. Banknotes issued by commercial banks had counterparty risk, meaning that the bank may non be efficient to make payment when the note was presented. Notes issued by central banks had a theoretical risk when they were backed by gold and silver. Both banknotes and coins are specified to inflation. The durability of coins means that even if metal coins melt in a fire or are submerged under the sea for hundreds of years they still have some value when they are recovered. Gold coins salvaged from shipwrecks retain most all of their original appearance, but silver coins slowly corrode.