system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: When paper money became the new standard, how was in distributed? What was the process for people to exchange their old currency for the new currency?
gpt
Paper money started as promissory notes, created by private banks.

The idea is that the bank held the real currency, and would create the note promising to pay the bearer the amount promised on request.

When you have a note that can instantly be exchanged for 100 dollars, it effectively is worth 100 dollars, so if you've got something worth 100 dollars, which is easier to carry than 100 dollars, why bother turn it into actual money when you can just give people the notes as payment?

So promissory notes promising currency can be used as currency themselves. Because of the paper note's ease of use over bucket-loads of coins, they caught on.

But since there were many banks issuing notes, and an institution might not have accepted a note from another institution as payment, there needed to be some form of standardization. The government issued it's own notes to be the standard, which are recognized as acceptable payment in law (legal tender).

In the US, the dollar used to be backed up on the gold standard, so a dollar used to merely represent a certain amount of gold that; in theory; the government promised to pay the bearer.
I guess that makes a commercial bank note a promissory currency promising to pay a promissory currency.