Transaction History and Value, 1800s
We talk a lot about the need for anonymity in transactions. But, there was a time when anonymity was the last thing you wanted.
In the early 1800s, merchants had basically three devices to make a transaction: specie, banknotes, and bills of exchange. (I'll talk about the first two here, and discuss bills of exchange in another post.)
Specie was best, but it was scarce and expensive to transport. You didn't care who had used it before or if the coin was newly minted. It was relatively easy to verify its authenticity and its value (by weight).
Banknotes were more problematic. They were more plentiful and easier to ship, but they could be counterfeit. To determine authenticity, you would ask the customer the history of the note: Where did you get it? Who used it before? When? Where? The more details, the better. If the customer didn't know, a merchant would look for signs of previous use by merchants. So, he looked for pin holes.
Many merchants had the practice of placing accepted bills on a bill spindle (see the image), putting a hole in the note. As the notes circulated, they would accumulate more holes. A banknote with a lot of holes was almost guaranteed genuine, having a history of acceptance by other merchants.
Engravings of merchants in the 1800s show them holding notes up to the light. They are looking for pin holes, a record of its past use in transactions. Its provenance provided its value.