Challenge coins are not currency. Different branches of the military have different uses and customs for them, but when they’re being given or exchanged, the coins serve as literal tokens of gratitude. They can symbolize everything from a nod of appreciation to a deep personal connection.
challenge coins are often used to play a drinking game. Different branches of the military have different rules for the game, but the gist of it is this: you can throw down your coin, and perhaps holler out “coin check!”; everyone else in the group must pull out their challenge coins, and whoever doesn’t have one buys a round of drinks.
But—if everyone has their coin on them, the person who initiated the coin check is liable for the tab.
the history of challenge coins is that some army aviator was shot down during WW2, he was able to navigate back to friendly territory by proving his identity with his unit's coin. Or maybe WW1, I can't remember.
Military coins actually go back to the Greeks, a military would issue it's own currency to it's soldiers, and you could prove you were a soldier by having this coin. It was how they paid soldiers, basically 1/10th of an ounce of silver a day, so at the end of the month each soldier would have 3 ounces given to him. Early military coins were very basic, these days they're very intricate.
Today it's essentially a drinking game with veterans and active duty. If you're out at the pub and someone puts out a coin it's a "challenge", and whomever at the table doesn't have a challenge coin has to buy drinks. In the active duty worlds (when I was in) this was considered "super gay", like this could result in a bar fight in Okinawa or Honolulu... but in the veteran world, especially for guys who have been out for a while (I got out in 2007 as an example) it's a way of kinda sorta verifying your military past. You meet a lot of guys in veterans groups who are wholly full of shit, but to posses a unique and really cool challenge coin is a good indicator that the guy is mostly telling the truth.
You'll never know if he actually saw a guy eating the banana, but the probability he was actually in the service increases.
So it's kinda mentioned in the article with the POTUS coin, but a lot of times coins are given out (via the handshake) for acknowledgement of something you did that doesn't qualify for a formal award, such as a medal or a mention in dispatches or something similar. I have several unit coins for service and my Formation Commander's coin for helping to start up a new unit.
Usually (at least in the Canadian military) the drinking game is played with a specific coin, such as a unit coin. It's not good enough to respond to a coin challenge with just whatever coin, it has to be the same one that was challenged with. So if a guy pulls out his unit coin and you were in that unit, you better produce the same coin or you're buying a drink. Obviously, if you've never received that coin you are exempt, but you must be careful about how you go about challenging because anyone who can hear you that has it will present their coin and you could be buying a lot of drinks. This makes carrying around a pocketful of heavy coins a bit of a PITA, but hey, free drinks. My dress uniform gets pretty loaded down with all the extra weight.
Unit coins that are given are usually numbered and sometimes the game includes "coin seniority" where the lower number you have the more valuable your coin is. People will try to steal your coin and ransom it back for drinks, for example. Nothing like adding a little paranoia to a social event.