Bit is the term used to refer to one-eigth of a dollar (12.5 cents). Thus 2 bits, 4 bits, 6 bits describes 25 cents, 50 cents, and 75 cents respectively.
Southerners first applied this name to a Mexican or Spanish silver real worth one-eighth of a peso.
The Spanish dollar or ‘peso’, also known as the ‘pillar‘ dollar, was valued in New England at 6 shillings, or 72 pence. It was divided into 8 "reals" and thus the dollar was a ‘piece of eight‘. Each real was therefore valued at 9 pence and was called a ‘ninepence‘.
When the United States Congress divided the dollar into 100 cents, the New England shilling was valued at 16.656 cents, or the sixth part of a dollar.
In New York, however, the dollar came to be valued at 8 shillings. And, the "real" became the "York shilling" valued at 12.5 cents, called a "bit." Hence "2 bits" was valued at 25 cents and, as the saying goes, "2 bits, 4 bits, 6 bits a dollar." - TrueReligionWorks.com
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