The
history of paper money dates back to thousand years. According to the history of paper money, Jiaozi developed in China is the earliest form of paper money in the world.
There lies an interesting historical tale with the development of paper money in the world. The use of paper money first started in China in the 600s. At that time, the circular coins in China used to have rectangular holes in between and people used to string them in rope. However, for wealthy merchants it was difficult to carry the heavy string of coins and hence they started to give paper slip instead of the string of coins thus giving birth to Jiaozi, world's first paper money. According to historians, there are a number of reasons behind the evolution of paper money. The shortage and unavailability of metals is also a reason behind the development of the paper money or paper currency in the world.
Both the continents Europe and America have their store of history behind the evolution of paper money. In the Europe, the first paper money was issued in Protestant Leyden and that consisted of paper coins. The Stockholms Banco issued the first proper European Paper Money in 1660, which is a predecessor of the Bank of Sweden. The American paper money history says that, it was the Massachusetts Bay Colony that issued the first paper currency in the early 1690s, the use of printed banknotes though started in the 18th century.
The paper currency or banknotes are believed to have generated from drafts and bills. The drafts were the receipts for holding the value on account while bills were generated in the intention to convert some time in the future. Originally, it was the precious metals that were counted as money and the banknotes were considered as promissory note or I.O.U, which meant a promise to pay money, but were not exactly the money. Over the time, when the banknotes became more acceptable in the market due to easy transportability and were widely used worldwide, the concept of using precious metal as money gradually removed and paper money evolved.
The banknotes are generally made of dense 80 to 90 grams per square meter cotton papers. Linen, abaca or other textile fibers are also mixed in the cotton paper to increase the durability of the paper money.