One of the more frequently asked questions on this site's discussion group is where the term two 'bits' comes from. Most people know that it means 25 cents, but the origin is a mystery to them.
'Bit,' which ultimately comes from the Old English 'bita,' originally meant a morsel of food. From there it went on to denote any small thing, particularly a fraction of a larger whole. By 1683 in the English-speaking American colonies 'bit' had come to denote a Spanish/Mexican real, or one eighth of a peso. The peso was a common form of currency in the colonies. And in the early days of the United States, pesos were commonly used as dollar coins and real coins represented twelve and half cents, hence two bits equaled 25 cents.http://www.wordorigins.org/wordorb.htm
the dollar-sized 8 Reales coin ... served as the model in size for our dollar coin. The 8 Real coins circulated widely in Florida and the Caribbean prior to the Revolusion, and would have been familiar to American colonials. It is my feeling that the new nation elected to pattern its monetary unit after the Spanish 8 Reales rather than the British Pound, as a sign of independence from the mother country. The One-Real piece was a small silver coin, also called a "bit". That is why our quarter-dollar has come to be known as "two bits". http://www.westegg.com/etymology/