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Fiat Currency/Money

Fiat money is a type of currency that is issued by a government and declared to be legal tender, but it is not backed by a physical commodity like gold or silver. Instead, the value of fiat money is derived from the relationship between supply and demand and the stability of the issuing government, rather than the worth of a physical good.

Most modern paper currencies, such as the US Dollar, Euro, and Japanese Yen, are fiat currencies. Unlike commodities or cryptocurrencies, fiat money’s value is not based on an underlying asset but rather on the credit and trust in the economy and government that issues it. In the context of cryptocurrencies, fiat is often referred to when discussing the conversion or exchange rates between traditional currency and digital assets.