Creating Denominations in a Currency

Money in history has been everything from precious metals to shells, but minted coins introduced a revolution in how value was standardized and subdivided. Early societies realized that having multiple coin denominations (different valued coins) made trade and tax collection far more efficient than barter or single-unit currency. Equally important was the divisibility of currency, which is to say, the ability to make change and handle large or small transactions. This blog delves into why denominations arose and why divisibility was crucial, and how similar principles can inform a fantasy world’s economy.

Why Coin Denominations Emerged

Facilitating Trade & Barter Replacement

Early economies suffered from barter’s inconvenience, which can be boiled down to needing a double coincidence of wants. Introducing coins of set values greased the wheels of commerce. With coins, a farmer could sell grain for silver coins and then use a small bronze coin to buy bread, all without complex haggling. Multiple denominations meant buyers and sellers could give exact change, a practice that naturally arose to ensure fair exchanges.

Standardization and Trust

A coin’s stamp certified its value. When the Lydian kingdom around 7th century BCE introduced the first minted coins, each coin had an official weight and purity of precious metal. Different denominations often corresponded to different weights, essentially standardizing value units. An authority’s mark guaranteed the coin’s metal content, building trust among those who used the coin. By quantifying value in coins, states enabled more complex trade than using random lumps of metal. Standard denominations also simplified accounting and pricing.

Intrinsic Value and Metal Content

Historically, many coins derived value from the precious metals they contained. Denominations emerged in part to reflect different metal values. Larger denomination coins often had more gold or silver, while smaller ones had less or were bronze/copper for token value. For instance, ancient Lydia’s coins were made of electrum, a gold-silver alloy, and ranged from a heavy stater, which was worth a soldier’s pay for months, down to tiny fractional coins for daily needs.

People trusted coins that held real metal value, and having a range of sizes meant even modest transactions could utilize this trust. A high-value coin could be used for wholesale trade like buying a consignment of cloth, whereas a tiny coin of the same metal was available to buy a loaf of bread, and both bore the king’s mark ensuring fair weight.

Administrative Needs

Governments found coins very useful for tax collection and paying expenses. Standard denominations made it easier to assess and collect taxes in fixed amounts rather than in-kind contributions of grain or labor. For example, in the Roman Empire, taxes and fees could be demanded in specific coin amounts instead of awkward payments in livestock. Soldiers and officials were paid in coin as well.

In fact, the very first coins may have been created for military payrolls: A Greek legend holds that knife-shaped coins began when a prince allowed troops to trade their knives as currency. More concretely, Lydia’s heavy staters were used to pay mercenaries, and smaller denominations were necessary so those soldiers could spend their wages in local markets. Rulers also sometimes required that taxes be paid in the official coin, which forced a demand for the currency and its various denominations. This ensured the sovereign’s coinage circulated widely and had value.

This concept is very relevant to fantasy economies: A king can make his coin valuable by decreeing taxes due in that coin.

Social Equity & Accessibility

A range of coin values allowed all strata of society to participate in the money economy. If only large-denomination coins existed, ordinary people buying daily necessities would struggle and likely resort to barter. Thus, smaller denominations were minted so that common folk could buy a meal or pay a small tax. In many cultures, high-value coins were associated with the wealthy or with large trade, whereas low-value coins were “the currency of the common people” used in markets and wages. However, both had the official mint seal on it and this had a side benefit of solidifying a ruler’s power. After all, even the peasant using imperial copper coins daily is acknowledging the sovereign’s economic order as much as the noble using gold.

So that's how and why denominations emerged. It enabled scales of values that enabled small and large transactions, in daily commerce and taxes. It also created precision in pricing, wages and taxation, allowing value to be established at fine gradations. And that cut out the inefficiencies of barter, which allowed economic activity to flourish.

In essence, divisibility made money flexible. A gold coin could be traded down via silver and copper to equate any value needed. History's successful currencies all feature this trait and if you want to build a believable currency, your currency should also be divisible by many numbers.

Let's explore some specific examples.

Ancient Rome

Roman aureus of Emperor Trajan, 2d Century AD

Ancient Rome developed a sophisticated multi-denomination currency, evolving over centuries. In the Republican era, Rome initially used heavy bronze bars (aes rude), then cast coins (aes signatum), and eventually struck coins. By the late Republic and into the Empire, the system crystallized into a hierarchy of gold, silver, and base-metal coins. This allowed everything from paying a legionary's salary to buying a loaf of bread using the same currency system, simply different denominations.

Roman Denominations (Imperial Period):

In the 1st–2nd century AD, the key coins were: the aureus (gold), denarius (silver), sestertius (brass), with smaller subdivisions like the dupondius and as (bronze/copper) and the quadrans (copper). They were all inter-related in value at consistent ratios, as shown in the following table.

Denomination	Metal & Unit Weight	Value in Base Units	Typical Uses and Notes
Aureus	Gold (~7.8 g under Augustus)	= 25 denarii = 100 sestertii	Large transactions, state treasury, dowries, military pay chest; very high value coin symbolizing wealth of empire.
Denarius	Silver (~3.8 g)	= 4 sestertii = 16 asses	Standard currency for trade, daily wages, and pricing of most goods; backbone of Roman economy (one denarius roughly a day’s wage for skilled work).
Sestertius	Brass (Orichalcum, ~25–28 g)	= 2 dupondii = 4 asses = ¼ denarius	Everyday transactions, market purchases; also used as a unit of account for large sums. Physically large coin often featuring imperial propaganda.
Dupondius	Brass (~13 g)	= 2 asses = ½ sestertius	Low-value coin for small trade; often distinguished by portrait with radiate crown (to indicate double value of as).
As	Copper (~10–11 g)	Base unit; 1 as = ¼ sestertius	Common coin for cheap goods (food items, lamp oil). In Republic, an as was a hefty one-pound bronze; by Empire it was a small copper coin due to debasement/weight reduction.
Semis	Copper (~5 g)	½ as (one half of a copper as)	Rarely seen by the imperial era (earlier a standard bronze half-unit); by Empire often omitted in favor of just using asses/dupondii.
Quadrans	Copper (~3 g)	¼ as = 1/16 sestertius = 1/64 denarius	Smallest coin, used for token purchases (entry fees, very cheap goods). Literally “quarter” coin. Often omitted from accounts due to tiny value, but crucial for daily small change.

Roman coins were thus highly divisible and interchangeable. If you had only a gold aureus but needed to spend just a few denarii, a money-changer or merchant could break your aureus into silver for you. Or, if you had a denarius but needed small change, it could be exchanged into a pile of asses or quadrantes. This flexibility kept the economy fluid.

Evolution and Stability:

The relative values were adjusted occasionally (for example, under Augustus an aureus was ~7.75 g gold, fixed at 1:25 denarii; later emperors debased some coins), but the idea of fixed denominations remained. Earlier in the Republic, a denarius was at one point equal to 10 asses, then later 16 asses, but in each era the principle of denominational currency was present. The names even carried over to successor systems: medieval “d” for penny from denarius, etc.

What’s important for world-building is that the Romans demonstrated a full spectrum of coin values: from luxurious gold to scrappy copper. This allowed the Roman economy to function at scale – facilitating massive imperial tax collections and military payments, down to a peasant buying his daily bread. Any fantasy empire modeling Rome might similarly establish a “gold-silver-copper” triad with set ratios, ensuring that a hero paying for an inn can use small coins while a king’s ransom is held in large ones.

In Roman times, making change was an expected part of commerce. Shopkeepers might have scales to verify coins, but thanks to denominations, they didn’t need to cut coins. (Cutting coins did happen more in early medieval period, but Romans usually minted the fractions they needed.)

The presence of coins like the half-denarius (called a quinarius) and even a half-sestertius (semis), meant that any sum could be assembled. For example, to pay 1.5 denarii, one could use 1 denarius + 2 sestertii.

In short, Roman coinage offers a clear blueprint of how a multi-tier currency can operate: different metals for different denominations, fixed exchange rates between them, and widespread circulation of even tiny coins so that no transaction was too small.

But speaking of the Middle Ages.....

Medieval Europe: Penny, Shilling, and Pound System

By the Middle Ages in Europe, the Roman coinage had fallen into memory, but the idea of denominations survived through the pounds, shillings, and pence (denoted by £, s, d for libra, solidus, denarius). Medieval monetary systems inherited Roman nomenclature and Carolingian reforms gave them new life. The key medieval coin was the penny. Larger units like shillings and pounds often existed as accounts, not actual coins, until later. Divisibility here was achieved through counts of pennies or by physically cutting coins for change.

Origin and Structure

In the late 8th century, Charlemagne instituted a uniform monetary system in Western Europe. He defined that one silver pound was a weight of silver, roughly 326 grams in the Carolingian measure and it would be divided into 20 shillings (solidi), and each shilling into 12 pence (denarii). Thus 1 pound = 20 shillings = 240 pence. This Carolingian system spread and became standard across medieval Europe.

For example, Anglo-Saxon England under King Offa adopted it, and it persisted in England for over a thousand years. In fact, it was the basis of British currency until 1971! Initially, only the penny was actually minted as a coin. The shilling and pound were notional!

(This is somewhat reminiscent of the Ria stones of the Yap people where these stones represent wealth. I would not say that Ria stones are currency, more that they represent a family's wealth. Anyway, back to currencies).

How these notional shillings and pounds worked: People would simply reckon accounts in those units. If something cost 1 shilling (12 pence), you’d pay with 12 silver pennies. If a land rent was 1 pound, that meant 240 pennies. The system was handy for bookkeeping and large transactions without needing huge coins to represent those amounts.

Splitting Coins

Medieval pennies were silver coins, small (around 1.3 to 1.5 grams each in the High Middle Ages). Because silver was valuable, a single penny represented a fair amount of spending power, e.g. in 13th-century England a penny might buy a loaf or two of bread, or some ale. The penny was the anchor of medieval currency. Every other denomination was a multiple or fraction of the penny. To get smaller than a penny, initially people literally cut pennies into halves, giving us the half-penny or ha’penny or quarters, called farthing, from Old English fēorðing meaning “fourth part”.

These cut pieces circulated as coinage! This physical divisibility solved the need for small change in an era when minting separate tiny coins was difficult. But by the late medieval period, mints did start issuing actual halfpenny and farthing coins to supplement this system, but coin-splitting remained common earlier on.

Combining Coins

As trade grew, larger transactions became frequent, and it was cumbersome to count out hundreds of pennies. Thus, eventually actual coins for shillings and pounds appeared. In England, a shilling coin (worth 12d) was first minted under Henry VII in 1500s. A pound coin in gold (the sovereign, worth 20s) was first minted in 1489. But even before they existed in coin form, everyone understood these units, as we discussed earlier.

The key concept is: units of account can exist without physical coins, as long as smaller coins can combine to represent them.

The medieval economy thus had built-in divisibility: the penny was the smallest common coin (with half/farthing subdivisions), and you could aggregate up to any amount. If a knight owed 7 shillings and 3 pence in tax, he could pay 87 pence, and he might actually hand over, say, 80 whole pennies and 7 cut pennies.

Later, as coinage became more sophisticated, additional denominations emerged: the groat (4 pence coin) in late medieval times, the florin or noble for larger trade, etc. But the core £/s/d structure remained. It offered many divisors (240 pence in a pound gives lots of factors), which is convenient in an age of mental math. For example, a third of a pound is 80 pence (6s 8d), a quarter is 60 pence (5s), etc.

This system meant even a peasant living on the margin could engage in the cash economy. A laborer might earn a few pence a day, and could spend a halfpenny on some cheese or a farthing on a candle. Meanwhile, a lord dealing in pounds of silver for a land purchase was conceptually using the same money, just 240 pennies to a pound. It tied the economy together.

However, one persistent issue was the shortage of small change in some periods. Minting technology and costs sometimes lagged, so kings focused on issuing larger silver pennies and pounds of account, neglecting to provide enough halves and farthings. This led to complaints and local attempts to create token small change. A fantasy world could mirror this by having villages resort to tokens or barter for the tiniest transactions if the royal mint doesn’t supply enough petty coin. This can add a great element of realism, especially in medieval inspired worlds.

And now, let's move on from Europe and talk about the Islamic Caliphates.

The Dinar, Dirham, and Fals

As Islamic civilization spread in the 7th–8th centuries, it inherited monetary practices from Byzantium and Persia and forged its own tri-metallic system. The early Caliphates of Umayyad and Abbasid established a clear hierarchy of denominations: the gold dinar, silver dirham, and copper fals (plural fulus). These roughly corresponded to high, medium, and low denominations, fulfilling different economic roles. The divisibility and convertibility of this system helped the Islamic world’s trade thrive from Spain to Central Asia.

Islamic coinage was explicitly bi- or tri-metallic. The dinar was a gold coin (the name comes from the Roman “denarius” via Greek), typically about 4.25 grams of gold. The dirham was a silver coin, around 2.9–3.0 grams of silver. The fals was a copper coin for everyday small change. This system mirrored the old Roman/Byzantine division (Byzantines had gold solidus, little silver coinage, and copper folles; Persians had silver drachms and copper).

Under Caliph Abd al-Malik in late 7th century, the caliphate reformed the coinage to have distinct Islamic character, including the removal of human images, and the inclusion of inscriptions, but he maintained the denominations. The coins carried Arabic script, often quotations from the Quran, but importantly they carried no face value, because their value was intrinsic to their metal and set by weight.

Ratio and Divisibility

A formal ratio was established in Islamic law: 7 dinars = 10 dirhams by weight. In other words, the weight of 7 gold dinars equaled that of 10 silver dirhams. This works out to each dirham being 0.7 of a dinar in weight.

Practically, if a dinar was ~4.25 g, a dirham was ~2.97 g. This implied a gold to silver value ratio of about 1 to 15. In daily use, however, the exchange could fluctuate based on precious metal prices, but the idea was that these coins had a known relative worth. People could convert wealth between gold and silver, and use copper for token change.

For example, if a sheep cost 1 dinar, you could also pay in an equivalent number of dirhams. Copper fulus were generally not convertible to gold or silver at fixed rates as they were fiat to some extent, but they filled the need for very low value transactions like a loaf of bread or a handful of dates.

Notably, Islamic rulers at times issued fractional or multiple denominations of the above. Half-dirhams or quarter-dinars were not uncommon. For example, the Umayyads struck occasionally a nisf dirham (half-dirham) for convenience, and later some dynasties issued quarter-dinars for use in jewelry or trade. So, rather than force everyone to use only whole units, they provided smaller coins when needed.

Under the Abbasids, the purity of gold and silver was high, and these coins became a stable store of value. Fulus, being copper, were more prone to inflation, as copper had low intrinsic value. Historical records talk of fluctuations in the value of fulus, and sometimes markets refusing copper if too much was in circulation.

This again is a point for fantasy economies: if too many token coins, like copper with low intrinsic worth, are issued without regard to their conversion to silver or gold, they can suffer trust issues. Medieval Islamic markets solved this by always allowing exchange into silver at market rates, and authorities periodically adjusting the copper coin weight.

Practical Example

Consider a traveler in 9th-century Baghdad. He might carry a few gold dinars hidden in his sash for big expenses or as savings. For buying a camel, he’d use a dinar or two. For paying a night’s stay at a caravanserai or a large purchase of textiles, he might use 5 dirhams. For daily expenses like food, he’d use fulus. If a simple meal cost 10 fals, and he only had dirhams, he could change one dirham, maybe worth 30 fals, and get back 20 fals in change. This fluid use of three metals made commerce possible at all levels. One chronicler notes how markets in the caliphate had money-changers (“sarrafs”) at every corner to facilitate these exchanges, showing how normal it was to convert and divide currency.

Chines Coins and Paper Money

Ancient China’s approach to currency was distinct from the West, yet it too developed denominations and an emphasis on divisibility. Instead of gold and silver coins for everyday use, Chinese economies mostly used bronze coins for daily transactions and larger bronze or precious metal units for bigger wealth transfers. Over 2000+ years, Chinese currency evolved from shaped objects (knives and spades) to the famous round cash coins with square holes, and even further, to paper currency. Through these changes, the idea of denominational currency and divisibility was ever-present – from inscribed values on spade money to strings of hundreds of cash coins representing higher units to paper money printed by using copper plates.

Origins of Chinese Paper Money

Paper money first appeared during the Tang Dynasty (7th–9th century) as a private innovation, and became formalized under the Song Dynasty (10th–13th centuries).

Tang Dynasty "Flying Cash" (Feiqian 飛錢): During the late Tang period (around the 8th–9th centuries), merchants in major cities like Chang'an and Chengdu found it risky to transport heavy copper cash coins over long distances. Instead, they deposited coins with trusted agents and received paper certificates called feiqian ("flying money") that could be redeemed elsewhere. This was not yet true government-issued paper money, but it was a private promissory system that made large transactions easier without physically hauling coins. It complemented coinage, not replaced it. Essentially you could look at this as a very early form of a draft cheque or travelers cheque. Money houses had agreements to transfer the coins drawn on between themselves.
Song Dynasty "Jiaozi" (交子):In the Northern Song Dynasty (960–1127), the government formalized and monopolized the system. They issued the first official paper money called jiaozi around 1024 CE in Sichuan Province. Jiaozi were certificates backed by deposits of coins and/or trusted by state authority (essentially a gold standard equivalent paper money). They specified a fixed denomination, usually based on strings of cash coins (e.g., 1 jiaozi = 1,000 cash coins = 1 guan 貫).
Later refinements under the Southern Song led to broader state-issued notes called huizi and qianyin.

Paper Money and Divisibility

Early paper money was tied directly to coinage. A jiaozi note could be redeemed for a certain number of cash coins, typically one or multiple strings (a string = ~1,000 coins). The big advantage at this point was making large transactions easier by eliminating the need to carry literal sacks of coins.

Paper money however didn't replace coins, they complemented the original system. People still needed coins for daily small transactions like buying food, or paying laborers. Paper notes were mostly used for large-scale trade, tax payments, and merchant transactions.

This was in part because early paper notes were not easily divisible in themselves. If you had a note for 1,000 coins but wanted to buy something worth 50 coins, the seller couldn't "tear off" a piece of the paper. Instead, you either had to redeem the paper for coins at an exchange office or use coinage for small sums.

So, coins handled microtransactions and paper money handled large transactions, creating natural economic layering.

One of the big problems with paper money was counterfeit bills. In a fantasy world, it's worth thinking about countering counterfeiting of paper money through magic.

Fantasy Application

Designing a currency system for a fictional world can greatly benefit from the lessons of history. The overarching theme is balance: provide enough denominations to handle all scales of trade, but not so many as to confuse or burden the economy. Here are some key insights:

Multi-Tier Currency: Consider a tri-metallic or bi-metallic system like Rome or the Islamic Caliphates – e.g., gold dragons, silver moons, copper stars in your fantasy realm. Ensure a plausible conversion. This gives your world high, middle, low denominations. High for big trade/treasure, low for day-to-day buying. It’s intuitive for audiences and grounded in real economics.
Intrinsic vs Token Value: Think about whether your coins have intrinsic metal value. In a medieval-like fantasy, likely yes (that is to say, gold coins are actually gold). This will tie denominations to metal weights, as with historic coins. For example, you could state a silver coin weighs one ounce and 16 of them equal one gold ounce coin, which is roughly the Roman ratio. If magic or fiat is involved (say a sorcery guild issues paper money), you could have token currency, but then be mindful of making small units available or specifying how it’s backed.
Denominations Named in Fractions: You can enrich lore by naming coins in a way that shows their relation. Perhaps your world’s currency: the “Sun” coin is the standard, the “Moon” coin is a quarter of a Sun (because the moon is smaller than the sun), and the “Star” coin is a twelfth of a Sun (for 12 zodiac stars). Such naming patterns subconsciously inform the reader of value differences. Or use simple numbering: e.g., in the Stormlands, they mint platinum “Royals” equal to 100 copper “Commons,” with intermediate “Crowns” (10 commons). The key is a consistent ratio that characters can reckon.
Small Change and Everyday Trade: Ensure there is something akin to the penny, as all these historical societies did. If your story has villagers and street markets, what do they use to buy a loaf of bread? If a gold coin is too large, mention copper bits or even physical cutting of coins. This not only adds realism but could create plot points, e.g., counterfeit coins that are underweight when cut.
High Denominations and Wealth: Conversely, for large sums like tribute to a dragon, or financing an army, consider how they haul that value. Perhaps large bars of electrum or chests of gems, serving as a “pound” unit in effect. In history, moving too many coins was a problem, hence the use of bills of exchange in later periods. In a fantasy world, magic could ease transport, but it’s compelling to sometimes burden your characters with the weight of wealth, e.g. “The thief opened the chest expecting gold royals, but found only copper pennies. 10,000 of them. It was a fortune, but impossibly heavy to carry off!”
Paper Money: You could have paper notes backed by strings of coins, which could eliminate the need for all that weight. Large purchases (e.g., a ship, a castle) might be done via paper notes, while daily markets still work in coins. In that case, exchange offices or licensed moneychangers could become important world elements. Forging paper money, inflation scandals, or theft of a vital note could be major story arcs. Magic could be used to counter this type of crime. And lastly, in such a world, only wealthy merchants and nobles might use paper. In that case, peasants might think of paper notes as "ghost money."
Regional Variance and Conversions: In fantasy, different kingdoms should have their own coins. History saw this often with for example, hundreds of feudal coinage types in medieval Europe. This raises the issue of exchange rates and divisibility across systems. You could incorporate money-changers as characters, or have one realm’s coin prized for its purity.
Taxation and Story Impact: If your plot involves taxes or feudal dues, denominate them! “The baron demands 5 silver falcons from each peasant family”. Now peasants must somehow get those coins, implying they must sell crops or labor for coin, a big driver in real history for monetization. It also grounds the reader as they get a sense of how hefty that tax is if they know a falcon coin is a week’s wages. Historically, colonial powers often forced locals to use currency by imposing a head tax payable only in coin, thus pushing a subsistence economy into a cash economy. In a story, a tyrant could do likewise, driving home the need for common folks to earn coins (maybe fueling adventure hooks like going to hunt for treasure out of desperation to pay tax).

In conclusion, whether you emulate Rome’s layered gold-silver-bronze, medieval Europe’s penny-based accounting, the Islamic tri-metallic balance, or China’s trusty copper coins and paper money, the goal is to make your world’s economy feel real and functional.

Denominations ensure that a farmer and a king can both engage in commerce in their own ways, yet part of a unified monetary system. Divisibility ensures that when your hero buys a potion or a night at the inn, the transaction makes sense. It also opens narrative possibilities since coinage can be stolen, debased, enchanted, or become a plot point.

With a bit of planning, the coins in your fantasy world can do more than jingle realistically, they can tell stories of their own, stamped with the history and economy of your world, just as real coins bear the imprint of civilizations long gone.