As the name suggests, representative money ‘represents’ something that is usually valuable. It is not money, but a symbol. So naturally, it does not consist of coins or banknotes.
In other words, representative money is a token or certificate given in exchange for valuable things like gold, silver, oil etc. It is linked to the commodity that backs it and hence, is also known as ‘commodity-backed money’.
The concept is believed to have originated with the ancient Sumerians. History goes that small baked clay tokens in the shape of cattle were used instead of real animals in barter system. Later, representative money gained popularity among pilgrims in the Middle Ages.
In the 19th century, a lot of currencies acted as representative money as they were exchanged for a fixed amount of real money.