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- Fiat Currency
Fiat Currency
Fiat currency is money that is declared to have value despite a lack of intrinsic value. An item has intrinsic value if it still has value if it isn’t being used as a form of money. Creating a fiat currency requires a central authority to control the currency and maintain its supply. Most modern governments use fiat currency as the primary money of their economy.
An alternative to fiat currency is commodity money. Commodity money is an asset with intrinsic value that is also used as a form of currency. This is commonly an asset that can be consumed or used for construction. However, commodity money is generally harder to transact with due to inferior portability, divisibility, or durability.
Finally, a currency could be representative money. Representative money does not have intrinsic value on its own, but it can be exchanged for something that does. For example, a currency that can be exchanged for barley would be representative money.
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