The history of paper money or bank note or paper currency dates back a long time. In the early days of humanity, grain or cattle served the concept of currency or money and the system was known as the barter system; the barter system though used to vary from region to region.
The development of money slowly came from the importance of precious metals and agricultural products in the economy. The journey of money even passed through the precious metals, conch shells and cigarettes to now used paper money or bank notes. The discovery of touchstone was the reason behind making precious metals as money as any soft metal could be tested for purity giving an idea of the worth of that metal lump. This system gave birth to the standard coinage. But the system of commodity money slowly was evolved into the system of representative money.
In this process, the banks issue paper receipt, which was redeemable for any precious goods.
Soon the paper receipts started serving as money. The representative paper money also gave way to the fractional reserve banking. Over the passage of thousands of years, paper currency is the most commonly used physical money now.
The money or typically a paper money is a token or a medium of exchange. Though there have been arguments regarding the actual functioning of money, the concept of money involves a number of functionalities. As a medium of exchange, the money should be recognizable of its value by both the presenter and the receiver. The money also needs to be easily transportable and easily calculable. The money needs to be durable also and hence a number of countries have started to make their paper money in plastic in order to increase the durability.
Generally, in every country there lies a central bank or reserve bank, which is obliged with the responsibility to issue bank notes, paper currency and coins. The design, logo and security measures of the paper money and coins to prohibit any sort of copying are also handled by the central bank of a country.