What is a fiat currency?

From Wikipedia 
Fiat money is currency which derives its value from government regulation or law. It differs from commodity money, which is based on a good, often a precious metal such as gold or silver, which has uses other than as a medium of exchange. The term derives from the Latin fiat ("let it be done", "it shall be").The first use of fiat money was recorded in China around 1000 AD. Since then, it has been used continuously by various countries, concurrently with commodity currencies.

Almost all governments have adopted the use of paper Fiat currency because they can control it by speeding up or slowing down the issuance of their currency.

The main reason that modern governments love fiat currencies is that politicians love nothing more than to promise infrastructure that they monopolise. These services are often extremely expensive and while citizens love getting "free" services they hate getting taxed too much. So generally governments will effectively print new currency to pay for election promises. 

The problem with this is that the printing of new money makes all currency that is already in circulation worthless. This process is called inflation. 
Inflation is actually a hidden tax, and it hits the savers the hardest. This becomes a problem because most elderly people in society live off of their life savings because they have no more working abilities.

As the value of peoples savings disappear, so does the probability increase that they end up in poverty after a lifetime of saving.

Because Bitcoin and gold cannot just be printed out of thin air, they are considered inflation proof.
Although this is true, Bitcoin is a very young currency and is currently still in its "fair price discovery" phase.
This means that the price is still extremely volatile as no one really knows what it is worth and no central authority is in place to enforce a certain price.


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