Fiat Currency

Fiat currency is government-issued money that is not backed by a physical commodity such as gold or silver. Its value is derived from the trust and authority of the issuing government and is maintained through legal regulations. Examples of fiat currencies include the US Dollar (USD), Euro(EUR), and Japanese Yen (JPY). Unlike cryptocurrencies, fiat currencies are centralized, meaning they are controlled by governments and central banks, which manage monetary policies such as interest rates and inflation.

Fiat currencies are used for everyday transactions and are recognized as legal tender by governments. However, fiat currencies are subject to inflation and other economic factors, which can affect their purchasing power over time. As a result, some investors turn to alternative assets, including cryptocurrencies, as a hedge against inflation or economic instability.