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A coin is a piece of hard material, usually metal or a metallic material, usually in the shape of a disc, and very often issued by a government. Coins are used as a form of money in transactions of various kinds, from the everyday circulation coins to the storage of vast numbers of bullion coins. In the present day, coins and banknotes make up the cash forms of all modern money systems. Coins made for circulation (general monetized use) are usually used for lower-valued units, and banknotes for the higher values; also, in most money systems, the highest value coin made for circulation is worth less than the lowest-value note. The face value of circulation coins is usually higher than the gross value of the metal used in making them, but this is not generally the case with historical circulation coins made of precious metals.

Token coins[]

Token coins are money substitutes in the form of coins, where the owner is in a position to exchange them at need, free of expense and without delay. They have a similar function as banknotes, but have usually smaller denominations[1].


Throughout history have governments often debased the coins in circulation, by replacing some of the precious metal by a base metal to achieve direct profit by getting more coins from a given supply of metal, or to inflate the currency to make the payment of debts easier (or both).

But the inflation of coins has certain disadvantages for their producer: the production of debased coins takes time. It is impossible to replace the entire existing stock of coins at once. Old sound coins will circulate side by side with new debased coins. When the market participants realize what is happening, they will spend much more time distinguishing between old and new coins; or they might use only new coins for payments and hoard the old coins, or sell them abroad. This will also attract other counterfeiters to do the same (like it happened in 16th century Spain[2]). If the people are free to do so, they could start using another type of coins. The supply of coins will, at least temporarily, undergo a deflation, which will create problems for private users as for public finances. This problem will go away, once the coins become purely nominal, without any precious metal. All of these actions tend to reduce profits of those debasing the currency. It is one of the reasons why the states keep the debasement in secret like private counterfeiters.[3][4]

Other popular form has been also the "clipping" or "shaving" of coins, where a small portion of the metal was shaved off. That is why many coins have their rim marked with stripes (milling or reeding), text (engraving) or some other pattern that would be destroyed if the coin was clipped.

First Coins[]

The use of metal for money can be traced back to Babylon more than 2000 years BC, but standardization and certification in the form of coinage did not occur except perhaps in isolated instances until the 7th century BC.[5]

One of the precursors were metal ingots. On Crete were found copper ingots from 17th century BC, in the shape of oxskins, with writings about their purity and full weight. [6] Historians generally ascribe the first use of coined money to Croesus, king of Lydia, a state in Anatolia. The earliest coins were made of electrum, a natural mixture of gold and silver, and were crude, bean-shaped ingots bearing a primitive punch mark certifying to either weight or fineness or both.[5] Some theorize, that the first stamped coins were issued by priests, and that the first mints were in temples.[7]

Coins made payment by "tale", or count possible, rather than weight, greatly facilitating commerce. But this in turn encouraged "clipping" (shaving off tiny slivers from the sides or edges of coins) and "sweating" (shaking a bunch of coins together in a leather bag and collecting the dust that was so knocked off). The result is described by Gresham's Law ("bad money drives out good" when there is a fixed rate of exchange between them): good, heavy coins were held for their metallic value, while light coins were passed on to others. In time the coins became lighter and lighter and prices higher and higher. To correct this problem, the coins were weighed for large transactions, and there was pressure for recoinage. The problem was largely ended by the "milling" of coins (serrations around the circumference of a coin), which began in the late 17th century. A more serious problem was, that the sovereigns often attempted to benefit from the monopoly of coinage.[5]


  1. Ludwig von Mises. "11. The Money-Substitutes", Human Action, online version, Chapter XVII. Indirect Exchange, referenced 2009-06-29.
  2. Richard Gaettens. Geschichte der Inflationen Von Altertum bis zum Gegenwart (German: History of Inflations from Old Ages to the Present), Die Velloninflation in Kastilien (The Vellon inflation in Castile) p. 52-73. ISBN: ISBN 3-87045-211-0. Referenced 2010-01-30.
  3. Jörg Guido Hülsmann. "The Ethics of Money Production", online version, Chapter 8. Legalized Falsifications p.110-111, referenced 2009-06-07.
  4. 5.0 5.1 5.2 Encyclopedia Britannica. "Money", referenced 2010-08-06.
  5. Richard Gaettens. Geschichte der Inflationen Von Altertum bis zum Gegenwart (German: History of Inflations from Old Ages to the Present), Einleitung (Introduction) p. 15-21. ISBN: ISBN 3-87045-211-0. Referenced 2010-01-16.
  6. Gardner, Percy. "The types of Greek coins; an archaeological essay (1883)", Chapter 1. Publisher: Cambridge [Eng.] University Press, 1883. Digitized book at the Internet Archive. Referenced 2010-08-06.

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