Fiat

Fiat is a term used to describe government-issued currency that is not backed by a physical commodity, such as gold or silver. It is the most common form of currency used globally and is generally accepted as a means of payment for goods and services.

Fiat currency is often subject to inflationary pressures, as central banks can create more of it at will, leading to a decrease in its purchasing power over time. This is in contrast to commodity-backed currencies, which have a fixed supply and can't be easily manipulated by monetary authorities.

Fiat currencies are commonly traded on foreign exchange markets, where their relative values are determined by supply and demand factors, as well as macroeconomic indicators such as interest rates, inflation, and political stability.

Examples of fiat currencies include the US dollar, the euro, the Japanese yen, and the British pound. Cryptocurrencies, on the other hand, are often seen as a potential alternative to fiat currencies, as they are not subject to the same inflationary pressures and are designed to operate independently of central banks and other financial intermediaries.

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