What is "banknote"

banknote \bank"note`\, bank note \bank" note`\(b[a^][ng]k"n[=o]t`).

1. A promissory note issued by a bank or banking company, payable to the bearer on demand. See also sense 4.

   Note: In the United States popularly called a bank bill.

2. Formerly, a promissory note made by a banker, or banking company, payable to a specified person at a fixed date; a bank bill. See Bank bill, 2. [Obs.]

3. A promissory note payable at a bank.

4. A promissory note issued by an authorized bank, payable to the bearer on demand and intended to circulate as government-authorized money; in the United States such notes may only be issued by a Federal Reserve Bank; as, he peeled off five one-thousand-zloty banknotes.

   Syn: bill, note, government note, bank bill, banker's bill, bank note, Federal Reserve note, greenback.

n. 1 A piece of paper currency. 2 (context historical English) A demand note issued by private banks presumably backed up by gold or silver coin.

n. a piece of paper money (especially one issued by a central bank); "he peeled off five one-thousand-zloty notes" [syn: bill, note, government note, bank bill, banker's bill, bank note, Federal Reserve note, greenback]

A banknote (often known as a bill, paper money, or simply a note) is a type of negotiable instrument known as a promissory note, made by a bank, payable to the bearer on demand. Banknotes were originally issued by commercial banks, who 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 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 Commercial banknotes have primarily been replaced by national banknotes issued by central banks.

National banknotes are generally legal tender, meaning that medium of payment is allowed by law or recognized by a legal system to be valid for meeting a financial obligation. 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. 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.

The idea of using a durable light-weight substance as evidence of a promise to pay a bearer on demand originated in China during the Han Dynasty in 118 BC, and was made of leather. The first known banknote was first developed in China during the Tang and Song dynasties, starting in the 7th century. Its roots were in merchant receipts of deposit during the Tang Dynasty (618–907), as merchants and wholesalers desired to avoid the heavy bulk of copper coinage in large commercial transactions. During the Yuan Dynasty, banknotes were adopted by the Mongol Empire. In Europe, the concept of banknotes was first introduced during the 13th century by travelers such as Marco Polo, with European banknotes appearing in 1661 in Sweden.

Counterfeiting, the forgery of banknotes, is an inherent challenge in issuing currency. It is countered by anticounterfeiting measures in the printing of banknotes. Fighting the counterfeiting of banknotes and cheques has been a principal driver of security printing methods development in recent centuries.