Step 1: Supplies
hammer
string
coin
medium nail
large nail
piece of wire(about 2 cm) not in picture
pliers not in picture
wood or something else to nail into( helps if you have 2 large planks)in picture but to small

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This statute means that you may be violating the law if you change the appearance of the coin and fraudulently represent it to be other than the altered coin that it is. As a matter of policy, the U.S. Mint does not promote coloring, plating or altering U.S. coinage: however, there are no sanctions against such activity absent fraudulent intent.
Whoever fraudulently alters, defaces, mutilates, impairs,
diminishes, falsifies, scales, or lightens any of the coins coined
at the mints of the United States, or any foreign coins which are
by law made current or are in actual use or circulation as money
within the United States; or
Whoever fraudulently possesses, passes, utters, publishes, or
sells, or attempts to pass, utter, publish, or sell, or brings into
the United States, any such coin, knowing the same to be altered,
defaced, mutilated, impaired, diminished, falsified, scaled, or
lightened -
Shall be fined under this title or imprisoned not more than five
years, or both.
So you see, if the money is minted by the US, (it is) and the coin is "current", that is: in use and accepted as currency, then ANY defemation/mutilation is illegal, nit just that which renders it "fake" or unacceptable as currency.
This instructable clearly falls under these guidelines.
http://www4.law.cornell.edu/uscode/18/usc_sec_18_00000331----000-.html
I believe in just about each instructable about working with a coin someone raises this defacemant law. Surely by now its time to lay this thing to rest. If the fed was after people who alter coins (one of the no-nos in the law) then the companies who gold plate or colorize coins and then pedal them on TV are more likely to have the FBI knocking on their door. Personally I haven't seen anything in the news about these companies being busted but maybe the feds are just trying to lure us all into a sense of false security and so that as soon as we drill that hole in that quarter or make a pendant of a nickel they can swoop down on us and prosecute and/or persecute us to their hearts content.