Fiat

Fiat, or fiat currency, is a currency that exists and has value merely because it’s home government says so.

A fiat currency has no innate value nor any natural utility. It is only considered value because of the declaration and force of the government.

In the world of cryptocurrency, the word “fiat” is very commonly used to refer to government money. For instance, any US citizen or global trader who uses the US dollar would typically call their dollar-based accounts “fiat”. It is a fundamental distinction from decentralized cryptocurrencies that are backed by their own algorithmic rules and not through the force of government.

Some fiat currencies have a history of being backed by gold. They typically were worth a lot more when that was the case. But, once not backed by anything at all, the value can (and does) inflate over time. Being backed by nothing but government (or central bank) decree, it is therefore called fiat.

Every fiat currency in history has, eventually, returned to it’s own intrinsic value: ZERO.