Fiat currency

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Fiat currency is government-issued money that is not backed by a physical commodity like gold or silver but instead derives its value from trust in the issuing authority. Examples include the U.S. dollar, euro, and yen, which are used for everyday transactions and are regulated by central banks. The value of fiat currency is influenced by economic policies, supply and demand, and overall market confidence rather than a fixed asset.

The meaning of fiat currency in the context of blockchain and cryptocurrencies is significant because it represents the traditional financial system that digital assets aim to complement or disrupt. Unlike cryptocurrencies, which operate on decentralized networks, fiat currency is controlled by governments and financial institutions. Many crypto exchanges allow users to convert fiat into digital assets, bridging the gap between conventional money and blockchain-based economies.

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