In the U.S, the bit is equal to 1/8 of a dollar or 12.5 cents. In the U.S., the "bit" as a designation for
money dates from the colonial period, when the most common unit of currency used was the Spanish dollar, also known as "piece of eight", which was worth 8 Spanish
silver reales.
One eighth of a dollar or
one silver real was
one "bit".
With the adoption of the decimal U.S. currency in 1794, there was no longer a coin worth of a dollar but "two
bits" remained in the bit and 15¢ a long bit.
Robert Louis Stevenson describes his experience with bits in Across the Plains, p. 144:1
In the Pacific States they have made a bolder
push for complexity, and settle their affairs by a coin that no longer exists – the BIT, or old Mexican real. The supposed value of the bit is twelve and a half cents, eight to the dollar. When it comes to two bits, the quarter-dollar stands for the required amount. But how about an odd bit? The nearest coin to it is a dime, which is,
short by a fifth. That, then, is called a SHORT bit. If you have
one, you
lay it triumphantly down, and save two and a half cents. But if you have not, and lay down a quarter, the bar-keeper or shopman calmly tenders you a dime by way of change; and thus you have paid what is called a LONG BIT, and lost two and a half cents, or even, by comparison with a short bit, five cents.
