Fiat is government-issued currency like the US dollar or euro that is not backed by a physical commodity but by trust in the issuing government.
Fiat currency is money issued and backed by a government rather than by a physical commodity such as gold. Its value comes from public trust and the authority of the issuing state.
Examples include the US dollar, euro, yen, and British pound. Fiat is legal tender, meaning it must be accepted for debts and transactions within its country.
Because central banks can adjust the money supply, fiat currencies can lose purchasing power over time through inflation. This is one reason some investors hold assets like gold or Bitcoin as a potential hedge.
In crypto, "fiat" is the everyday word for traditional currency, as in "cashing out to fiat" or "fiat on-ramp," which describes converting between government money and digital assets.
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