However in order to pay a debt in gold or silver is cumbersome and bulky and so eventually it was realized that it was more convenient to give the paper note or the certificate as a means of exchange. This is because the new owner of the certificate could  "accept it for value" knowing full well that as  the holder of the certificate- the holder in due course- he could always exchange the value written on the note for the amount of gold or silver held in the bank or alternatively he could continue to keep the holdings there in the bank for safe keeping.

Anyone holding gold in a bank for safe keeping would have a certificate or paper note he could present to the bank which the back would accept in exchange to withdraw his gold.  So the first paper notes certified ownership of gold or silver deposited in a community bank .

Surprizingly it wasn't all that long ago, within 3 generations, that one could cash a notarized piece of paper for the real money it represented which was gold or silver in a bank! The value was never in the paper but for what it could be exchanged or turned in for! As simple as that may seem somehow in accepting pieces of paper for value we today seem to have forgotten that.

Next GO TO - Legal Tender and the Value of Money