## Understanding Fiat Currency vs. Digital Currency Today, the term **fiat currency** refers to regular money, which is not backed by a tangible asset like gold or silver. Instead, its value is based on the trust and stability of the issuing government or central bank. In contrast, **digital currency** exists solely in electronic form and is not tied to a physical currency. While there are various types of digital currency, the most common ones are: * **Cryptocurrencies:** Decentralized digital currencies, such as Bitcoin and Ethereum, that rely on cryptography for security and transparency. * **Stablecoins:** Digital currencies designed to maintain a stable value against a fiat currency or other asset. * **Central bank digital currencies (CBDCs):** Digital currencies issued and backed by central banks, like digital versions of national currencies. Understanding the differences between fiat currency and digital currency is crucial for navigating the evolving financial landscape.
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