Fiat Currency
Government-issued currency with legal tender status, not backed by a physical commodity.
Beginner-friendly explanation
A fiat currency is a traditional currency used daily, like the euro or the dollar. It is declared valid by the government but has no intrinsic value like gold. Its value is based purely on trust.
Example:
When you buy a coffee with euros, you are using fiat money.
Intermediate-level insight
Fiat money is a currency whose value is enforced by sovereign authority without physical backing (like precious metals). Central banks regulate its issuance through monetary policies, affecting inflation, growth, or interest rates.
Example:
The European Central Bank adjusts interest rates to control the value of the euro, a fiat currency.
Advanced perspective
Fiat money is governed by complex dynamics: monetary policy, systemic trust, sovereign debt. During instability, it can experience rapid devaluation (e.g., hyperinflation). Its contrast with decentralized assets (cryptos) drives new economic paradigms.
Example:
Venezuela’s fiat currency, the bolívar, collapsed under hyperinflation, leading citizens to adopt Bitcoin.
Cryptocurrencies & Tokens
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