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Denomination

Denomination is the currency amount, assigned to means of payment such as coins 1, banknotes 2, gift cards or digital payment systems.

Denominations in practice

In legal tender, denominations often find their base in tenfolds of 1, 2 and 5. For example, the euro has coins of 10, 20 and 50 cents, of 1 and 2 euros, and notes of 5, 10, 20, 50, 100, 200 and 500. However, many alternative numerical subdivisions exist or have existed, such as the Pound Sterling that was composed of 20 shillings or 240 pence up till ‘decimalisation’ in 1971 3.

In complementary currencies, however fewer denominations are usually established. For example, Eco iris uses notes of 5, 10 and 50, while Makkie uses time credits of ½ and 1 (hour). A notable exception is Bitcoin which is a decimal currency which can be subdivided in units of up to six decimals are possible in transactions.

Denomination v Unit of Account

Denomination differs from ‘unit of account’ in that denominations describe the units in which a currency can really be obtained (the physical notes or coins, for example), while ‘unit of account’ refers to the standard numerical unit of measurement (or numeraire)enabling uniform interpretation of value and cost, e.g. dollar, hour or gram of gold.

The difference between the unit of account and denomination can best be illustrated through a practical example. For the Bristol Pound the unit of account is the £ sterling but it is denominated in B£.

In time banking the numeraire of unit of account is (subdivisions/multiples of) minutes or hours; in energy-backed systems, kilowatt-hours or carbon quantities may be the unit of account (See Energy currency).

References

  1. http://en.wikipedia.org/wiki/Coin
  2. http://en.wikipedia.org/wiki/Banknote
  3. http://en.wikipedia.org/wiki/Pound_sterling#Subdivisions_and_other_units
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