From Goldsmiths to Bankers, from Money to Currency, 7

Hence, the entrance of fiat money to expand the money supply by freeing it from the constraint of intrinsically valued raw material supply, but hence as well the greed induced in both established powers and private economic operators by the opportunity to overproduce fiat money, and the ensuing sprouting up of systems and attempts to infiltrate it to exploit and/or pervert it.

The development of fiat money with all its features goes from the I Owe You to the banknote, passing through any form of negotiable instrument. Their differentiation is simple: if an IOU is the debtor acknowledging his/her debt to the creditor, any form of negotiable instrument is the same, but with an official, legal value; a negotiable instrument is any way the debt of the debtor and the corresponding credit of the creditor can be proven, claimed, enforced before third parties and in court. And then, while each negotiable instrument can be apart from any other, as each one can have different debtor, different creditor, different amount and different conditions of redemption, every banknote brings about standardisation and legal tender. Standardisation because banknotes are all interchangeable with one another as they all have the same amount, the same creditor – the bearer, the same debtor – the issuer, the same conditions of redemption – on demand in something like gold or actual value, hopefully… Of course these features would make sense only as long as banknotes were actually backed up by real issuer’s goods but, alas, the legal tender feature opens the door to the loss of that very sense…
In fact, and in short, legal tender means that its acceptance is enforced: both public authorities and citizens are compelled to accept those banknotes, and debts paid with them are compulsorily settled. Now, to the degree one reckoned accepting banknotes to be a benefit, one wouldn’t need to be forced to, isn’t it? The less the banknotes are backed up by real value, the more the need to enforce their acceptance. If you’re owed a loaf of bread, you won’t consider it settled with a piece of paper unless it comes with a guarantee or a threat.