FIAT Currency

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1 year ago
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Again, I just heard a foreign word again when I got to know the Noisecash platform, after knowing that the transactions used on the platform use digital currency, namely, while the currency used is conventional currency in the form of Rupiah, so when I have to interestingly I had to change from BCH to FIAT dollars and then convert it into rupiah currency, which is the official currency used for transactions in our country.

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That's where I tried to learn about FIAT, I only relied on the internet as a reference in my learning to know FIAT itself, from various references then I tried to write a conclusion.

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Then, what is FIAT Currency?

Fiat currency is the standard currency now used by almost every country in the world. Fiat money is legal money issued by the government and has no intrinsic value.

According to Investopedia, the definition of fiat money is money whose circulation is not supported by physical goods, such as gold or silver. But the government still publishes it.

In the past, if a country wanted to print money, it had to request gold reserves from the central bank.

Meanwhile, fiat currency can be printed directly without using gold reserve as collateral. Currently, countries generally no longer use gold as collateral, but use fiat money.

The value of fiat currency is determined by the relationship between supply and demand and the stability of the government that issued it. Not the value of the goods that support it.

The most modern banknotes are paper money. Examples of fiat currencies are Rupiah, US Dollars, Euros and currencies of other countries.

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Centralized fiat money or. So, fiat money is money officially issued by the central bank as well as paper money and coins.

Besides being able to be used as a medium of exchange in a transaction, the role of fiat money is as a store of value, a medium of exchange, and a unit of account.

The value of paper money can increase or decrease with inflation or deflation.

On the supply side, the central bank has complete control over the paper money in circulation based on market demand. The central bank can also apply economic scenarios to regulate the circulation of paper money.

The term fiat money comes from the Latin fiat which means determined by the authority. In this case, the government determines the value of the currency and does not represent other assets or financial instruments such as gold or checks.

Advantages of fiat currency

The advantage of fiat currency is that it is easier to track economic developments. Fiat money is produced using renewable resources, so money can be created by a monetary authority, in this case a central bank.

Fiat currency is a form of currency that is backed by the government of a country. Thus, this form of currency maintains its value through the stability of the government and the national economy.

In addition, the advantage of paper money is that it can carry out its functions like money. Where money serves as a medium of exchange for storage and also as a unit of account.

Lack of fiat currency

While a shortage of fiat currency is prone to inflation, its value will continue to decline. This is because fiat money is not tied to physical reserves, such as national gold or silver reserves.

The danger of printing too many banknotes is that it causes a constant decline in the value of the currency, even hyperinflation. So he can skyrocket the price of goods and services that do not match demand.

If people lose faith in a country's currency, it depreciates. It is far from being a gold-backed currency. Although not a currency, gold is still reliable because of its intrinsic value.

This is information about banknotes. You could say fiat currency is currency issued by the government and is currently used as a medium of exchange.

Thank you for taking the time to read my article, I hope it is useful and adds insight.

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