Military challenge coins are also known as military coins, unit coins, memorial coins, unit challenge coins, or commander's coin. The coin represents affiliation, support or patronage to the organization minted on the coin which is a treasured and respected representation of the organization minted on the coin. Commanders use specially minted military coins to honor service members for their hard work.
According to one story, challenge coins originated during World War I. American volunteers from all parts of the country filled the newly formed flying squadrons. Some were wealthy students attending colleges such as Yale and Harvard who quit in mid-term to serve in the military during the war. In one squadron, a wealthy lieutenant ordered medallions created in solid bronze and presented them to service members in his unit.
One young pilot placed the medallion in a small leather pouch that he wore about his neck. Shortly after acquiring the medallions, the pilot’s aircraft was severely damaged by ground fire. He was forced to land behind enemy lines and was immediately captured by a German patrol. In order to discourage his escape, the Germans took all of his personal identification except for the small leather pouch around his neck. In the meantime, he was taken to a small French town near the front. Taking advantage of a bombardment that night, he escaped. However, he was without personal identification.
He succeeded in avoiding German patrols by donning civilian attire and reached the front lines. With great difficulty, he crossed no-man's land. Eventually, he reached a French outpost. Unfortunately, saboteurs had plagued the French in the sector. They sometimes masqueraded as civilians and wore civilian clothes. Not recognizing the young pilot's American accent, the French thought him to be a saboteur and were ready to execute him. He had no identification to prove his allegiance, but he did have his leather pouch containing the medallion. He showed the medallion to his would-be executioners and one of his French captors recognized the squadron insignia on the medallion. They delayed his execution long enough for him to confirm his identity. Instead of shooting him they gave him a bottle of wine.
Back at his squadron, it became a tradition to ensure that all members carried their medallion coin at all times. This was accomplished through a challenge in the following manner - a challenger would ask to see the medallion. If the challenged could not produce a medallion, they were required to buy a drink of choice for the member who challenged them. If the challenged member produced a medallion, then the challenging member was required to pay for the drink. This tradition continued on throughout the war and for many years after the war while surviving members of the squadron were still alive.
Information Courtesy of University of Massachusetts Lowell SALUTE Honor Society