Why do banknotes have a higher nominal value than coins?
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Back in the day, money had a real value based on a semiprecious or precious metal. Money was made using that metal so it’s value was independent of anything but itself. This has two issues. One; carrying around a lot of money can be unsafe and heavy. Two; The finite supply of these metals become a hindrance to an economy’s ability to grow.
Back in the late middle ages, banks became a safe place to store your money, and they would give you a slip of paper showing how much money was deposited. It eventually came to be realized that trading these slips of paper was much more convenient than bringing the actual money to buy things, especially when one was traveling. This concept formed into paper money.
As the second issue came to be more of a problem, governments switch to what is known as fiat currency. This pegged the value of money to the faith and credit of the government that issued it instead of to something tangible like metals. This allowed economics to grow beyond the value of metals they had on hand.
So, tl;dr: paper money first was a way to carry around a lot of money safely and easily, then became a way for economies to get bigger than the value of precious metals a country had.
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