Lineage of the Challenge Coin
The history of challenge coins have a variety of origins; however, the most widely accepted (but undocumented) lineage begins in World War I. During that time, American volunteers were used in various air squadrons to help fight against the Germans. In one such squadron, a lieutenant from a wealthy family purchased brass medallions (or coins) plated in gold, that bore the squadron’s motto and crest for every pilot in his unit. It expressed a sense of unit affiliation, brotherhood, and shared struggle amongst the men and was highly prized.
One such airman placed his medallion in a small leather pouch around his neck and shortly after receiving it, his aircraft became heavily damaged while flying over occupied France and he was forced to land. After surviving the landing the airman was immediately captured by an enemy patrol, and to discourage potential escape the German soldiers confiscated all his identification papers. Likely thinking the small leather pouch around the airman’s neck was religious in nature they allowed him to keep it.
As the airman was being moved to a POW camp in France, he was brought to a small village near the front. During the night’s aerial bombardment the airman was able to action his escape, but without papers he had no means to prove to sympathetic French civilians who he was. After successfully evading German patrols, he made it to the front and no-man’s land. As he attempted to cross into allied France, a French patrol (already on heightened alert due to rampant German saboteurs in the region) captured the airman again. Unable to recognize the American’s accent, they concluded he must be another German saboteur and prepared to execute him on the spot.
Without proper identification papers, the airman had no means to prove his allegiance. It wasn’t until he presented his medallion given to him by the lieutenant, that one of the French soldiers recognized the unit’s crest. This provided the airmen enough time to allow the French soldiers to investigate his identity thus saving his life. As a parting gift, the French soldiers gave the airman a bottle of wine, which he brought back to his unit. Reunited with his squadron, the airman’s story began the tradition of carrying the medallion or coin at all times, and when challenged present the coin to confirm one’s unit affiliation – and thus the Challenge Coin game was forged. 
Perhaps the first officially documented use of the challenge coin stems from the CIA’s predecessor, the Office of Strategic Services (OSS) during World War II. Simply a local French coin kept by those operating behind enemy lines, it was used to establish one’s “Bona Fides” during meetings in Nazi occupied territories. This, and other signals, helped prevent infiltration of other spies whom would lack the knowledge of which coin to present at what meeting.
The first recognized military unit to use challenge coins was the 10th Special Forces Group (SFG) commanded by COL Aaron Banks in Lengries, Germany during 1952. COL Banks was himself a former OSS officer and used the challenge coins to recognize a soldier’s achievements, and promote unit cohesion and morale. Additionally, it was used to help raise funds for soldiers receiving medical treatment. The 10th SFG was commonly referred to as the “green berets” and were looked upon with distain by conventional forces due to the perception of Special Forces acting like “cowboys” in theatre. Thus the use of challenge coins was largely kept within the Special Operations community until the establishment of the US Special Operations Command (USSOCOM) in 1987. 
Separately, the 101st Airborne claims the mantle of first formal Army unit to incorporate challenge coins into their organization. In 1957, the 1-327th Airborne Battle Group minted the unit’s “Commander’s Coin” highlighted in the local Ft. Campbell Courier on March 10th, 1957, according to the division’s Don F. Pratt Museum.  This tradition was continued by the 101st Airborne by minting the unit’s first division-wide challenge coin for 101st WWII veteran Walter “Smokey” Gordon who distributed over 10,000 of the coins among other members of the division. Artist H. Alvin Sharpe was the contracting artist, and today its design remains a staple of the 101st Divisional Challenge Coin 47 years later.
With the establishment of USSOCOM conventional units began to work in earnest with SFGs and slowly put aside their distain for Special Operations. One of the first things conventional forces took from the Special Operations community was their use of challenge coins. The first conventional military unit to widely employ challenge coins was the 82nd Airborne in Fort Bragg, North Carolina. Coincidentally, the 82nd Airborne shares the same garrison location with the Army’s Green Beret’s School and Headquarters known as the John F. Kennedy Institute for Military Assistance on Smoke Bomb Hill in Fort Bragg.
There are other smaller footnotes to the use of challenge coins in history. Some use in the Philippines during World War II to establish identification, or when soldiers of that war conducted a “pfenning check” (Pfenning being the lowest denominator of German currency at the time). Later it was also used amongst limited soldiers in Vietnam as lucky tokens or mementoes.  However, even before then soldiers used such tokens dating back to the Roman times and included simple coins or medallions.
Overall challenge coins are similar to their monetary predecessors. Ranging in size from 1”, 1.5”, and typically 2” in diameter they can be between 2.5 or 3mm thick. Some more odd shaped challenge coins include ovals, an aircraft or equipment, and other shapes while some units began designing their challenge coins to resemble functional bottle cap openers, arrowheads, or even cipher discs. Other features, such as spinning centers, 3-D engraving, or epoxy coating only increase the complexity of a challenge coin. In the end, a coin is only limited by the artist’s imagination and capability to fund its development via a manufacturing company. In 2009 the NBC Nightly News did a short feature on challenge coins that can be found at the following address; http://www.nbcnews.com/video/nightly-news/28663038#28663038
Unless challenge coins are minted in precious metals, such as gold or silver, its monetary value can never exceed the overall cost to manufacture such a coin. Yet it is the intrinsic value placed upon challenge coins that give them its value. Typically, a challenge coin is presented as an informal award for outstanding service or performance of duty. It is also used as a tool to improve morale and unit cohesion. So the true value of a challenge coin is one placed upon by its unit’s history and relationship to whomever it is awarded to. Often assisting with the monetary value of the challenge coin is the rank and office of whomever is issuing the coin, with the President of the United States, Director of the CIA, and some Special Operations units amongst the most rare. Recognizing the opportunity for mass profit, some manufacturers began over production or modifying the design of legitimate and rare challenge coins to a minimal degree that both can still be passed off and sold commercially (often at great profit) to unsuspecting collectors.
1. GlobalSecurity.org. Challenge Coin. July 5, 2011. http://www.globalsecurity.org/military/intro/coin.htm (accessed October 5, 2012).
2. Acosta, CPL Wil. Global Security. USMC News. March 1, 2005.
http://www.globalsecurity.org/military/library/news/2005/03/mil-050304-usmc03.htm (accessed October 5, 2012).
3. Lammie, Rob. MentalFlossA Brief History of Challenge Coins. September 26, 2012. https://www.mentalfloss.com/blogs/archives/143144 (accessed October 6, 2012).
4. Don F. Pratt Museum. New Exhibit Highlights Our Divisional Coins. June 29th, 2013. http://www.campbell.army.mil/campbell/PrattMuseum/Pages/PrattMuseum.aspx (accessed at https://www.facebook.com/pages/Don-F-Pratt-Museum-101st-Airborne-Division-Air-Assault/240897409274892 on June 29th, 2013).
5. Northwest Territorial Mint. News – The Challenge Coin Tradition. 2012. http://custom.nwtmint.com/news_challengecoinhistory.php (accessed October 5, 2012).