Ignis ossium. The Athenæum shows that the word means a fire made of bones; one quotation runs thus, “In the worship of St. John, the people ... made three manner of fires: one was of clean bones and no wood, and that is called a bonefire; another of clean wood and no bones, and that is called a woodfire ... and the third is made of wood and bones, and is called `St. John's fire”' (Quatuor Sermones, 1499). Certainly bone (Scotch, bane) is the more ancient way of spelling the first syllable of the word; but some suggest that “bon-fire” is really “boon-fire.”
“In some parts of Lincolnshire ... they make fires in the public streets ... with bones of oxen, sheep, etc. ... heaped together ... hence came the origin of bonfires.” —Leland, 1552.
Whatever the origin of the word, it has long been uséd to signify either a beacon fire, or a boon fire, i.e. a fire expressive of joy. We often find the word spelt “bane-fire,” where bane may mean “bone” or beacon. Welsh ban, lofty; allied to the Norwegian baun, a beacon or cresset.
Source: Dictionary of Phrase and Fable, E. Cobham Brewer, 1894
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