Are you new to the cryptocurrency world and feeling a bit lost? Don't worry, you are not alone. The cryptocurrency space can be daunting for newcomers, with its many terms, abbreviations and definitions that can be difficult to understand.
ATAIX crypto glossary will help make sense of some of the most common cryptocurrency terms and definitions. Armed with this information, you'll be ready to start participating in this exciting and innovative new economy!
What is Fiat Currency?
Fiat currency is a legal tender not backed by a physical commodity, such as gold or silver. It is instead backed by the government that issues it. Examples of fiat currencies include the United States dollar, the euro, and the Japanese yen.
A key characteristic of fiat currency is that it is not freely convertible into other commodities. In other words, you cannot exchange it for goods or services without going through a financial institution. This makes it different from commodities like gold or silver, which can be exchanged for goods or services directly.
The value of fiat currency is based on faith and trust in the issuing government. If people lose faith in a government, its currency may lose value. After World War I, this happened in Germany when the German mark lost so much value that it became worthless.
Fiat currency can also be affected by inflation. This happens when the issuing government creates too much currency, causing its value to decrease. For example, Zimbabwe experienced severe inflation in the 2000s when the government printed too much money. As a result, prices for goods and services rose sharply, and the country’s currency became worthless.
Despite its drawbacks, fiat currency is here to stay. It's the most common type of money in use today, and it's likely to remain the global standard for the foreseeable future.