Challenge Coins are developed for specific units (military or otherwise) and is used to identify the bearer with their organization. These coins have a whole mystique about them. (e.g., they can't rightfully be pierced and used as a keychain fob as an example).
If a group of service people are in a bar and one of them asserts a challenge, everyone within earshot has to produce their challenge coin or they have to stand the challenger to a drink. If the challenger fails to produce his/her own coin if asked to, they have to buy a round of drinks for those with coins.
There are nuances and subtleties with Challenge Coins. If you own one and somebody asks to look at it, that person can keep the coin if you hand it to them. The correct procedure is to put it on a table or bar and then move away so that the other person can look at it. It's generally understood that the owner should not go more than three feet from the coin. However, the person who wants to look at it can then pick it up and examine it without the ownership transferring. When the person is finished examining the coin, he or she should place it back at the spot they picked it up from, and the owner then retrieves it. Those are the main rules.
Anyone outside the specific organizations for which the coin is produced may obtain one since the coins are also bought and sold by coin dealers.
This is the NSA version of the Challenge Coin. Made of bronze, it is 42mm in diameter and a little over 3mm thick. (Photo by Stephen A. Kallis, Jr.)
An Air Force Challenge Coin. (Photo credit unknown).
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