What is Fiat?11 Feb, 2020 David Kemp
Fiat is our usual money: dollars, euros, yuan and other official state currencies. The term itself is an abbreviation of the phrase “fiduciary money”, that is, those whose value is controlled and guaranteed by the state.
The phrase "Fiat money" is often used in cryptocurrency circles. "Withdraw in Fiat currency" means the exchange of cryptocurrencies for real money.
If we turn to history, we can learn that before banknotes were valued with the help of precious metals. But the amount of paper money grew much faster than the reserves of gold. Therefore, cash became independent and gold ceased to be the guarantor of their value. Approximately so money also became Fiat, backed just by guarantees of the state.
It is important to remember that cryptocurrency is valued equivalent to Fiat, often you change bitcoins, for example, for dollars. The euro and the dollar are the world's leading currencies, and the digital currency is valued in them.
The main differences between cryptocurrency and Fiat
Digital coins have several core differences compared to physical ones. And they are different not just because you cannot hold them in your hands.
First, the main advantage of cryptocurrency is that it is decentralized. Its existence is ensured by the members of the huge crypto community. Public money is completely controlled by the state.
Secondly, cryptocurrency is not subject to emission. It is not issued by governments or organizations. The emergence of new tokens is monitored by the technology itself. Typically, each project has a limit on the number of coins that will be issued.
Third, digital money cannot be faked. You constantly hear about the arrests of counterfeiters and the use of fakes. In the case of cryptocurrency, there were no such precedents and most likely will not be in the future. Blockchain reliably protects cryptocurrencies from such excesses.
Thus, it becomes clear that Fiat is ordinary money, the fruit of the world financial system. In the crypto community, they are often contrasted with cryptocurrencies. Even when it comes to the fact that digital assets in the future will completely replace the usual dollars and euros.
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