Also known as paper money, notes, or bills, banknotes are negotiable instruments that are used as along with coins as legal tender. Most countries issue their own type of banknotes and coins for use internally, with the currency of each country having a specific trading value with the currency of other countries. This establishment of a rate of exchange between the banknotes issued by each nation make it possible to easily convert currency when traveling to another country.
There are several advantages to the use of banknotes. For the most part, the value assigned to a banknote is higher than the value assigned to any type of coin intended for general consumer use. The exception to this rule is any coins that are considered collectible or rare, which may have a current market value that is significantly higher than the original value of the piece. This means that it is possible for an individual to carry greater sums of money on his or her person using banknotes with more convenience.
Banknotes are produced and issued under the direction of a federal treasury department. The use of specific processes to produce the notes helps to minimize the opportunity for counterfeiting that leads to the distribution of contaminated currency. Some of the safeguards used in the production process include specific grades and types of paper, unique blends of inks, and a series of markings that are extremely difficult for counterfeiters to replicate. With the aid of modern technology and innovations in this process, the ability to include markings that are not readily seen by the untrained eye help to further inhibit counterfeiting attempts.
Along with traditional paper banknotes, there is also some experimentation with notes made from various blends of polymer materials. The idea behind polymer banknotes is to minimize the effects of usual wear and tear that tend to shorten the life of the paper notes. Plastic notes are also considered difficult to successfully counterfeit, presenting another advantage that is highly attractive. Several nations began to produce these types of hardy plastic notes during the 1980’s, eventually expanding the approach to include all denominations of money issued within those countries. Experiments with hybrid notes composed of a mixture of plastic and paper have also been developed in a few countries. While the hybrids and polymer versions of notes have not replaced all paper money yet, there is an expectation that polymer will become the standard within the next several decades.