In the US, a bit is equal to 12 1⁄2 cents hence a quarter is called two bits. But have you ever wondered how come “bit” became a designation of money? Well, wonder no more because we have the answer.
Here’s the story.
Back in the early days of the US, there were many coins in use. One of them, which was quite popular during the 18th century, was the Spanish dollar. This Spanish dollar was made of fine silver and it was heavier and much larger than the other coins that were in circulation at the time. In fact, it was so large that it was often cut into eight smaller parts, hence each one was worth ⅛ of the dollar or 12 1⁄2 cents. Therefore, with two bits of this Spanish dollar, you had 25 cents – a quarter of a dollar. Later on, when the American quarter came into use, it got the nickname “two bits” since it was literally worth two parts of the Spanish dollar.
If you like what you read, then you will definitely love this one: Why Dimes, Quarters And Half-Dollars Have Ridges While Pennies And Nickels Do Not?
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Sources: How much is “two bits” and where did the phrase come from? | Ever Wonder Why?: Here Are the Answers!