Fiat currency is a type of currency that is declared as legal tender by a government. Unlike commodity money, which is backed by a physical commodity like gold or silver, the value of fiat currency is derived from the trust and confidence people have in the government that issues it.
"Examples of fiat currencies include the US Dollar (USD), Canadian Dollar (CAD), British Pound (GBP), and Japanese Yen (JPY)."
In the context of cryptocurrencies, fiat currencies are often contrasted with digital or crypto assets. While fiat currencies are centralized and regulated by governments, cryptocurrencies are typically decentralized and operate on blockchain technology.
"Bitcoin, a cryptocurrency, is often traded against fiat currencies like the US Dollar on cryptocurrency exchanges."
Fiat currencies are generally considered stable and are used for everyday transactions, banking, and business. However, they can be subject to inflation and other economic factors that can affect their value.
"Inflation can erode the purchasing power of fiat currencies over time."
* All terms and definitions may update as the Cryptionary improves.
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