Fiat Currency 101: What is Fiat?

Fiat currencies are the hard cash in your wallet and the digits on your phone or computer screen when you logon to your bank account.

Fiat currencies have existed for 100’s of years and each country on earth has its own fiat currency issued by the government.

Fiat currency’s role as a money supply to ensure economic prosperity and facilitate trade between parties quicker and cheaper than with gold or silver. Throughout history many different approaches to using gold or silver to “back” fiat currency partially succeeded but mostly failed. Every fiat currency in history has either collapsed financially, failed to war, economic sanctions or lost more than 95% of their buying power.

If you had £1 in 1970, the buying power of that same £1 in 2020 is the equivalent of £0.07. More than 99% of the GBP buying power has eroded to inflation.

How cryptocurrency compete with fiat currencies?

1) Cryptocurrencies like bitcoin have a fixed supply and cannot be adjusted. The conversion rate between goods and services find a natural balance between supply and demand and market activity.

2) Cryptocurrencies are transparent and all transactions, values, sources and destinations can be tracked in real-time.

3) True Peer-to-Peer transactions are possible as no bank, government or 3rd party are involved in a transaction, only the blockchain network where the network is completely decentralized.

4) Global reach for any currency transaction is possible with anyone with a wallet address on a mobile device, laptop or even piece of paper.

Learn more about Fiat currencies such as GBP & EUR at our coinpass academy