In simple understanding,
When the world faced the inconvenience of the Barter system and along with the storage of their earnings, they decided to form a society for the deposit of gold. Every depositor was given a receipt of gold quantity on their name, later they gave two types of receipt, one is specified and another was open. The open receipt carried the slogan ‘Agree to pay the gold to the bearer of this receipt‘. People carried open receipts for an exchange of goods.
Another problem creeped-in the value of the receipt, is always more than the required purchase of goods. A new method brought-in by the society to issue the gold conversion receipt in ounces of different denominations says 10 ounces,5 ounces, 2 ounces, 1 ounce.
And Later, The concept of gold currency receipt was introduced, the society started displaying day to day value of the gold in currency. They started issuing currency receipts equivalent to the Gold value in denomination of 1 dollar, 50 cent, 25 cent, 5 cent, 2 cent and 1 cent. This concept of currency value receipt eradicated the problem of exchange of goods and services. And if anyone wants to convert the receipts into gold, they have to approach the society, by bringing proper denomination of gold currency receipt in value.
Finally, the same Society was converted into a Bank and the same gold currency receipt was exchanged for currency notes and coins. The Bank started finding convenience that there are fewer and fewer people coming for an exchange of currency to gold. Slowly, Banks started to print currency twice of gold deposits and it went on multiplying..