Federal Reserve Note
What it is:
How it works/Example:
Founded in 1862, the U.S. Bureau of Engraving and Printing creates and produces Federal Reserve notes. It does not produce coins (that's the job of the United States Mint).
The production of Federal Reserve notes includes creating the templates and materials necessary to print . Because is a printed item, the U.S. Bureau of Engraving and Printing also must detect and deter counterfeit (in conjunction with the U.S. Secret Service).
Why it matters:
Most only has value because people want it. This idea is what made beaver pelts, shells, peppercorns, tulip bulbs, and other things into at various points in history. However, when the demand (or fashion) faded for some of these goods (or more people found they really needed corn instead of beaver pelts), these systems became cumbersome. Paper solves these problem because it is exchangeable for any good or service that people want (rather than just beaver pelts).
This isn't to say that paper and coins aren't the only forms of viable today. Quite often, companies use of their own as to acquire other companies, and anybody who has ever watched a crime show knows that cigarettes can buy a in prison.