to the Grand Watermelon responce?

In 1890, money was very different from what it is now. Modern money is fiat money but in 1890, it was gold and silver based so literally it was gold and silver.

Between 1750 and 1850, European trade with China which had little use for European goods resulted in diminishing silver supplies, resulting in coins of smaller and smaller denominations and resulted in "token silver" coins in England. The gold standard started to resolve the silver shortages. The US started with a silver standard in 1785 and like the UK encountered the silver crisis and merged into a bimetallic standard, US banks stopped paying in silver in 1857 and the government stopped paying in gold and silver in 1861 thereby ending the silver dollar standard. The gold standard continued on though without the direct exchange for metal and the US was the last to leave it in the 70's but for your time frame, an equivalence of money to silver is very likely, most money were actual silver coins and paper money were certificates of silver deposits often by various banks rather than by a government.

<<<why would someone trade silver for a paper note?>>>

Holders of large amounts of silver could now sell their bullion to the Treasury at the highest prevailing price and receive the lovely ”Grand Watermelons” in return.

These notes could then be used to buy gold coin from the Treasury. Because of the relative disparity in bullion values, anyone with large holdings of silver could make a fortune selling these Treasury Notes for gold.

<<<Did the silver price go up nad they traded for profit ?>>>

The "problem" was that the supply of silver had increased which, without government intervention, would have driven the price of silver down.

When miners suddenly struck silver within the great Comstock Lode in Nevada in the late 1800’s, the newly-rich silver barons lobbied Congress for some way to absorb the massive amounts of silver that were being unearthed.

Congress responded to the silver lobby by passing the Bland-Allison Act of 1878. That act ensured that the Treasury would buy two million dollars of silver each month at the highest market rate.

In the 1890’s, after more than 10 years of the Treasury propping up the silver market, the silver lobby wanted even more.

Thus was born the Legal Tender Act of July 14, 1890. In it, Congress legislated that a new issue of ”Treasury Notes” would be created, notes that could be used only for the purchase of silver.

<<<could you buy merchandise with silver in 1890 or did you need paper money ?>>>

My understanding is that most purchases were made with coins but that paper money was widely accepted. I don't know if many merchants accepted raw silver or not. My guess is that unless there were silver mines near the merchants, most merchants did not.

<<<Did the government demand the silver ?>>>

It was more the other way around. The silver barons demanded the government buy the silver.

<<<Sounds like something the Central Banks would do, but were they around then.>>>

I think the first Federal Reserve Notes came out about 1914, so I think that is when the Federal Reserve Banks were formed. Before then I think the Treasury performed at least some of the duties of a central bank.