Fiat money is the regular currency we use every day. Unlike cryptocurrencies that operate on blockchain technology in crypto, fiat currencies are:
- Issued and regulated by governments and central banks
- Not backed by physical commodities like gold or silver
- Valuable because people trust the government that issues it
- Legal tender that must be accepted for payment in their respective countries
When you see "fiat" mentioned on a crypto exchange, it's referring to your ability to buy cryptocurrencies using traditional money like dollars or euros.
I use fiat currency to enter the crypto market. The connection between these two financial worlds happens in several ways:
- Fiat on-ramps: Services that let you exchange your traditional money for cryptocurrency
- Fiat off-ramps: Ways to convert your crypto back to traditional currency
- Stablecoins: Cryptocurrencies pegged to fiat currencies (like USDT or USDC tied to the US dollar)
Understanding what fiat in crypto means is important because it represents the bridge between traditional finance and the new digital economy. Most of us still earn wages in fiat, pay taxes in fiat, and measure our crypto gains or losses against fiat values.
