Convertibility is an important factor in international trade, where instruments valued in different currencies must be exchanged.
Some currencies, such as the North Korean won, the Transnistrian ruble, and the Cuban national peso, are officially nonconvertible and can only be exchanged on the black market.
Under the gold and silver standards, notes were redeemable for coin at face value, though often failing banks and governments would overextend their reserves.
In the process, the principle that the banknote was merely a substitute for the real commodity money (gold and silver) was gradually abandoned.
Due to limited growth in the supply of gold reserves, during a time of great inflation of the dollar supply, the United States eventually abandoned the gold exchange standard and thus bullion convertibility in 1974.