Since 2016 the cryptocurrency market has risen to shake the unique position of fiat currencies. So what is fiat, what value does human life have and can it be replaced by Bitcoin?
Table of contents
- What is Fiat money?
- Advantages and disadvantages of Fiat
- How fiat currency works
- Where to buy crypto with fiat?
- Compare Fiat and Cryptocurrencies (Crypto)
1. What is Fiat money?
Fiat money is a currency printed and issued by the governments of countries. This currency is legally circulated and is not backed by any physical assets. Fiat's value is derived from the relationship between supply and demand and the stability of the country's currency, not the value of valuable objects such as gold and silver. The power of the government helps to keep the value of the fiat currency. Most countries in the world have their own fiat money system, which can be mentioned as: Euro, USD, VND, Won,...
Since fiat money has no physical value like gold and silver, fiat is easy to inflate or even become worthless in the case of “hyperinflation”.
Moreover, if their people don't trust the currency of a country, then that fiat currency will no longer have any value. This is completely different from valuable things such as gold, gold has intrinsic value, can be bought and sold on the market with great volatility, valuable for jewelry, decoration, ...
2. Advantages and disadvantages of Fiat
Advantages
- Cost: Issuing fiat money will be more affordable than other currencies like gold.
- Scarcity: Not as influential and rare as par currency.
- Convenience: Doesn't require large storage and is as carefully looked after as gold.
- International Trade: Can be used worldwide for exchange.
Defect
- No intrinsic value: Can lead to economic crisis and inflation. Because Fiat is issued by the state government from nothing.
- Vulnerable to inflation: Due to the nature of the issue without physical reserves like gold in the national treasury, inflation and hyperinflation are easy to occur. Take for example hyperinflation in Zimbabwe.
3. How fiat currency works
The nature of fiat money is not dependent on the types of goods, its value is based on the trust relationship between the subjects who are the issuers, owners and acceptors to use them. If confidence in the value of money is lost, demand will also be lost, leading to a decrease in value.
Currency is a measure of the value of goods, which is also the crystallization of value (GDP) in that country's currency. That is, the value of money represents the productive capacity of a country. As the productive capacity of a country increases, the exchange value of that country's fiat currency increases and vice versa.
The government is the sole entity that can print fiat money, so the government has the right to control the monetary system and make monetary policies (relax, tighten) or apply related tools when the Major financial events and crises occur to ensure the financial stability of that country.
4. Where to buy crypto with fiat?
Currently, you can use fiat to buy crypto easily at crypto exchanges like Remitano, Binance, Huobi,...
If you want to find a reputable and safe exchange, you can buy crypto) with fiat at Remitano. Remitano currently supports P2P, Swap transactions with 11 popular fiat currencies such as: GHSR (Ghana's currency), INRR (Indian rupee), KESR, MYRR, NGNR, PHPR, PKRR, TZSR, VESR, VNDR, ZARR. You can buy crypto with fiat here.
5. Compare Fiat and Cryptocurrencies (Crypto)
Characteristics of Fiat
Fiat money (fiat money) and Crypto (Cryptocurrency) have in common that they are not guaranteed in kind.
Fiat money is controlled by a country's government and central bank. Crypto is decentralized, operating and developing on the Blockchain platform.
How to create fiat money
Fiat money is issued by governments and central banks, not based on physical value but on the strength of that country's government and economy.
Cryptocurrencies have a specific, defined, and controlled supply.
Scope of use of Fiat
Fiat is recognized between countries, may be restricted by national geography, must be converted to the currency of the country with which we are dealing.
Crypto is easier to trade than fiat money because it is not restricted by any organization or government.
Retrieve transaction history
Cryptocurrencies are completely transacted on the Internet, once traded it is impossible to change or delete their history. Trading becomes easier and very convenient, profits are higher, and transaction history is retrieved quickly.
