Banknote

A banknote or bank note – also called a bill (North American English) or simply a note – is a type of paper money that is made and distributed ("issued") by a bank of issue, payable to the bearer on demand. Banknotes were originally issued by commercial banks, which were legally required to redeem the notes for legal tender (usually gold or silver coin) when presented to the chief cashier of the originating bank. These commercial banknotes were only traded at face value in the market served by the issuing bank. Commercial banknotes have primarily been replaced by national banknotes issued by central banks or monetary authorities. By extension, the word "banknote" is sometimes used (including by collectors) to refer more generally to paper money, but in a strict sense notes that have not been issued by banks, e.g. government notes, are not banknotes. National banknotes are often, but not always, legal tender, meaning that courts of law are required 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, most national currencies have no backing in precious metals or commodities and have value only by fiat. Except for non-circulating high-value or precious metal issues, coins are used for lower-value monetary units, while banknotes are used for higher values.