Peso was a name given in Spain and particularly in Spanish America to the 8-real coin or real de a ocho, a large silver coin of the type commonly known as a thaler (dollar) in Europe. It had a legal weight of 27·468 g and a millesimal fineness of 0·9305 (25·561 g fine silver). This real de a ocho or peso was minted in Spain from the mid 16th century, and even more prolifically in Spanish America, in the mints of Mexico and Peru. It was originally known as the piece of eight in English.
The piece of eight became a coin of worldwide importance in the 17th century, especially in trade with India and the Far East, where it was immediately melted down. At this time, the piece of eight was produced in Mexico and Peru in a rapid and simplified manner. Instead of making a proper flan or planchet, a lump of silver of proper weight and fineness was hacked off the end of a silver bar, then flattened and impressed by a hammer. The result was a crude, temporary coin, an irregular lump of silver. This type of coin became known as a cob in English, as a macuquina in Spanish. The Crown was entitled to a fifth of all gold and silver mined, the quinto real (royal fifth), and cobs were a convenient means of handling and accounting for silver. Although intended to serve only temporarily, some did remain in circulation as currency. Because of their irregular shape and incomplete design, cobs were ideal candidates for clipping and counterfeiting.
Spanish laws of 1728 and 1730 adopted modern minting techniques. Coins were to be minted with technologically advanced equipment so that they would be perfectly round and have milled edges. There was a simultaneous reduction in weight and fineness, the peso becoming 27·064 g, 0·916-2/3 fine ((24·809 g fine silver). This is the coin that became known in the British colonies as the Spanish milled dollar.
When Charles III of Spain adopted new coinage designs in 1772, he also reduced the fineness of the peso from 0·9166 to 0·9028. The fineness was again reduced (secretly) in 1786 to 0·875.
The old 8-real coin now became known in Spain as a peso duro, or simply a duro, and was rated 10 reales. By 1728, the role of the old peso was assumed in Spain by the new 2-real coin, now called a peseta. One peso duro, worth 10 reales, was equal to five of the new peseta coins, each weighing 5·876 g and containing 4·938 g fine silver. The fine silver content of the peseta was reduced to 4·855 g in 1772, then to 4·793 g in 1786.
During the French occupation, Joseph Bonaparte issued a 20-reales piece or piastre, actually a duro or peso of the 1772 standard (27·064 g, 0·9028 fine), and gave it a value of 20 reales. The peseta (containing 4·887 g fine silver) became a 4-real coin. The peso duro and peseta were retained in the monetary reform of 1821.
Spain adopted the French bimetallic standard on January 1, 1859, with the peseta equal to 4·500 g fine silver or 290·322 mg fine gold. This standard was replaced by a law of June 26, 1864, only to be restored on October 19, 1868, when the Latin Monetary Union system was formally adopted, with the peseta weighing 5·000 g, 0·835 fine (4·175 g fine silver), and a duro or 5-peseta piece weighing 25·000 g, 0·900 fine (22·500 g fine silver).
But the Spanish dollar continued to dominate the Eastern trade, and the peso of 8 reales continued to be minted in the New World. The coins was sometimes called a Republican dollar, but eventually any peso of the old Spanish 8-real standard was generally referred to as a Mexican dollar, Mexico being the most prolific producer. Mexico restored the standard of 1772, producing a coin of 27·073 g, 0·9028 fine, containing 24·441 g fine silver (the mark weight of the Mexico City mint was very slightly heavier than the standard mark of Spain).
In 1869-1870, not long after adopting the metric decimal system, Mexican mints began producing the peso of "Un Peso" denomination, popularly known as "balanza" (scales), with the same weight and fineness, but with a uniform diameter of 37 mm (making it slightly thicker than the old peso, which was slightly irregular, with a diameter of 38-40 mm). Chinese merchants rejected the new coin, discounting it 4%-5% in favor of the old 8-real peso. Faced with this threat to her silver exports, Mexico returned to the old 8-real peso by decree of May 29, 1873, but international trade was already shifting from silver to gold, and after 1873 there was a steady decline in the international price of silver. China began minting its own dollar coins in 1890, and Mexico minted the last 8-real peso in 1897. Between the 16th and 19th centuries, Mexico produced well over three billion of these coins.