Magnetism in the context of identifying banknotes refers to the use of magnetic inks that are printed on the bills. These inks contain iron oxide particles, which give them magnetic properties. This is an important security feature of many currencies, as it helps in detecting counterfeit bills.

Different denominations can have different magnetic patterns due to varying amounts and positions of the magnetic ink on the banknote. The magnetic code that is given by these patterns can be read by a magnetic sensor or head, similar to how a credit card strip works.

When a bill is inserted into a vending machine or any other bill reader, it is passed over the magnetic head which reads the magnetic ink. The signal obtained is then compared with the pre-stored information of the specific currency's denominations. If the patterns match, the machine accepts the bill and credits the appropriate amount.

It's worth noting that the technology used in banknote validators can get quite complex and often use a combination of different methods, not just magnetism, to ensure accurate and secure identification of banknotes.
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