{"id":2173,"date":"2022-05-20T08:23:41","date_gmt":"2022-05-20T08:23:41","guid":{"rendered":"https:\/\/www.aurumxchange.com\/?p=2173"},"modified":"2022-05-20T08:23:41","modified_gmt":"2022-05-20T08:23:41","slug":"what-is-fiat-money-and-how-does-it-relate-to-cryptocurrency","status":"publish","type":"post","link":"https:\/\/www.aurumxchange.com\/blog\/what-is-fiat-money-and-how-does-it-relate-to-cryptocurrency\/","title":{"rendered":"What Is Fiat Money And How Does It Relate To Cryptocurrency?"},"content":{"rendered":"<p><iframe width=\"100%\" height=300vh src=\"https:\/\/www.youtube.com\/embed\/RYcqFOms3LY?autoplay=1&#038;mute=1\"><\/iframe>In the last few years, the cryptocurrency market has been booming. But just as traditional currencies, cryptocurrencies are not immune to sudden price fluctuations.<\/p>\n<p>What makes cryptocurrencies volatile? If you want to make money with Bitcoin, Litecoin, or any other cryptocurrency, you should make sure you understand the reasons behind its volatility.<\/p>\n<p>In this blog post we will take a closer look at three of these reasons: decentralization and regulation, transaction speed and scalability, and crypto trading strategies.<\/p>\n<p>Before we start explaining these three main factors causing crypto volatility, let&#8217;s quickly discuss what is fiat money and how it works.<\/p>\n<p>In simple terms, &#8220;fiat&#8221; means &#8220;let it be.&#8221; Fiat currency is a government-issued legal tender that is not backed by any tangible assets but is recognized as legal tender by the issuing government or central bank.<\/p>\n<p>After reading this article, you will learn all about fiat money and how it compares to cryptocurrencies like Bitcoin and Ethereum. Let&#8217;s start by understanding why fiat money is so important for every economy around the globe.<\/p>\n<p>Fiat Money is the money that a government has declared to be legal tender, but is not backed by a physical commodity. Its value is essentially derived from the relationship between supply and demand rather than the value of the material that the money is made of.<\/p>\n<p>The most common examples of fiat currencies are USD, EUR, GBP and so on. A cryptocurrency like Bitcoin is not considered fiat money because its value doesn&#8217;t derive from government regulation or law like traditional currencies do, but rather from its nature as a scarce digital asset.<\/p>\n<p>In this article we&#8217;ll be discussing what fiat money is, how it relates to cryptocurrency and why governments have chosen to use it instead of commodities such as gold or silver.<\/p>\n<p>We&#8217;ll focus on fiat currencies in general first before moving on to cryptocurrency later in the article.<\/p>\n<p>What Is Fiat Money?<\/p>\n<p>Fiat Money is currency without intrinsic value that has been established as money usually by government regulation or law. The term fiat derives from the Latin word fiat which means &#8220;let it be done&#8221;. This term was used during the middle ages when authorities would stamp coins with an image signifying their approval.<\/p>\n<p>Fiat money only has value because a government maintains its value or because parties engaging in exchange agree on its value. Fiat money gives central banks<\/p>\n<p>n order to understand how cryptocurrency works, it is important to know a little bit about fiat money. Fiat money is currency that has no intrinsic value and only has value because of what the government says. Fiat money is also legal tender. This means that the government requires you to pay your debts with fiat money. Fiat currencies are considered to have a flexible value, which means that they can be adjusted in supply according to monetary policy and market demand. Determining how much fiat currency should be in circulation is called monetary policy. As mentioned above, fiat currency has no intrinsic value. This means that it is not redeemable for something of value, such as gold or silver. Fiat money also does not have any use value. This means that it cannot be used for anything other than as a medium of exchange (money).<\/p>\n<p>Cryptocurrency can be thought of as digital fiat currency; however, cryptocurrency does not use any form of physical medium (i.e., paper) like traditional forms of fiat money (such as the US dollar). Instead, cryptocurrency exists electronically in its digital form (also known as virtual currency). The most popular cryptocurrency is Bitcoin, which was created by Satoshi Nakamoto in 2009. Bitcoin uses peer-to-peer technology and operates with no central authority or<\/p>\n<p>Fiat money, also called fiat currency, is a government-issued currency that is neither backed by a commodity nor supported by a gold standard. Fiat currencies are the most common form of money today and are used throughout the world as the legal tender of their respective countries. Because fiat money is not linked to physical reserves, it risks losing value due to inflation or even becoming worthless in extreme cases of hyperinflation.<\/p>\n<p>Fiat money was used for many centuries in China up until the late 19th century. During this period, paper money was used alongside metal coins. The Chinese government would collect these notes at various intervals and reissue them with new interest rates. In the 19th century, Britain adopted the gold standard, which had been used in Spain and France during the 18th century. By making its currency convertible into gold at a fixed rate, Britain established a standard monetary system that was used globally for more than 150 years until World War I when most nations abandoned it for fiat currencies.<\/p>\n<p>The term \u201cfiat currency\u201d originated from Latin and roughly translates to \u201clet it be done\u201d\u2014a reference to governments decreeing that their currency must be accepted as a legal tender.<\/p>\n<p>Fiat money is a currency that a government has declared to be legal tender, but it is not backed by a physical commodity. The value of fiat money is derived from the relationship between supply and demand rather than the value of the material that the money is made of.<\/p>\n<p>Historically, most currencies were based on physical commodities such as gold or silver, but fiat money is based solely on faith. Fiat is the Latin word for &#8220;let it be done.&#8221; As long as people have faith in a government&#8217;s ability to manage its domestic economy, they will accept that country&#8217;s currency as payment for goods and services. Since then, the term has become synonymous with all paper currency that isn&#8217;t backed by a tangible asset.<\/p>\n<p>The creation of fiat money is considered an act of state, and only specific institutions are legally entitled to issue it. Commercial bank issued notes and coins can often act as fiat money (although they are technically promissory notes), but historically these were backed by gold or silver reserves held by the institution issuing them. The difference between fiat currency and representative or commodity money is that this intrinsic value is not shared by fiat currencies.<\/p>\n<p>The use of paper money began in China during the 7th century, but its uncertain value and ease of reproduction led empires to revert<\/p>\n<p>What is fiat money?<\/p>\n<p>Fiat money is a currency with no intrinsic value established as money, often by government regulation. It has an assigned value only because the government uses its power to enforce the value of a fiat currency or because the exchanging parties agree to its value.<\/p>\n<p>Fiat money does not have use value, and has value only because a government maintains its value, or because parties engaging in exchange agree on its value. It was introduced as an alternative to commodity money and representative money. Commodity money is created from a good, often a precious metal such as gold or silver, which has uses other than as a medium of exchange. Representative money is similar to fiat money, but it represents a claim on a commodity (which can be redeemed for the commodity).<\/p>\n<p>The term derives from the Latin fiat (&#8220;let it be done&#8221;, &#8220;it shall be&#8221;) used in the sense of an order, decree or resolution.<\/p>\n<p>What is cryptocurrency?<\/p>\n<p>A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency. Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies. Bitcoin<\/p>\n<p>The word &#8220;cryptocurrency&#8221; is derived from the encryption techniques which are used to secure the network. Blockchains, which are organizational methods for ensuring the integrity of transactional data, is an essential component of many cryptocurrencies. Many experts believe that blockchain and related technology will disrupt many industries, including finance and law.<\/p>\n<p>Cryptocurrencies are systems that allow for secure payments online which are denominated in terms of virtual &#8220;tokens,&#8221; which are represented by ledger entries internal to the system. &#8220;Crypto&#8221; refers to the various encryption algorithms and cryptographic techniques that safeguard these entries, such as elliptical curve encryption, public-private key pairs, and hashing functions.<\/p>\n<p>Blockchains, which are versatile, democratized, distributed ledgers, are the technology behind cryptocurrencies like Bitcoin and Ethereum and have the potential to disrupt banking as we know it. A blockchain can be thought of as a series of blocks. Each block contains information like date, time, and dollar amount of a recent transaction (i.e., buying coffee from Joe&#8217;s Cafe). When a block stores new data it is added to the blockchain. Blockchain, as its name suggests, consists of multiple blocks strung together. In order for a block to be added to the blockchain, however, four things must happen<iframe width=\"100%\"\" height=300vh src=\"https:\/\/www.youtube.com\/embed\/9XUbb2Tfe2I?autoplay=1&#038;mute=1\"><\/iframe><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In the last few years, the cryptocurrency market has been booming. But just as traditional currencies, cryptocurrencies are not immune to sudden price fluctuations. What makes cryptocurrencies volatile? If you want to make money with Bitcoin, Litecoin, or any other cryptocurrency, you should make sure you understand the reasons behind its volatility. In this blog [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.aurumxchange.com\/wp-json\/wp\/v2\/posts\/2173"}],"collection":[{"href":"https:\/\/www.aurumxchange.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.aurumxchange.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.aurumxchange.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.aurumxchange.com\/wp-json\/wp\/v2\/comments?post=2173"}],"version-history":[{"count":1,"href":"https:\/\/www.aurumxchange.com\/wp-json\/wp\/v2\/posts\/2173\/revisions"}],"predecessor-version":[{"id":2174,"href":"https:\/\/www.aurumxchange.com\/wp-json\/wp\/v2\/posts\/2173\/revisions\/2174"}],"wp:attachment":[{"href":"https:\/\/www.aurumxchange.com\/wp-json\/wp\/v2\/media?parent=2173"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.aurumxchange.com\/wp-json\/wp\/v2\/categories?post=2173"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.aurumxchange.com\/wp-json\/wp\/v2\/tags?post=2173"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}