What is Fiat Money?

fiat money

Fiat money. What is that? Why people often use this term talking about digital currencies? Does it have something to do with well-known brand of Italian cars? We are here to provide you with answers! Today, The Coin Shark will tell what are those colored papers that we use to buy things, how fiat money appeared, what is the logic behind our current economy and money and how all these things deal with virtual currencies.

Content:
(please, click the topic to scroll down to it)

  1. What is fiat money?
  2. A brief history of fiat money
  3. Fiat and virtual currency
  4. Conclusion

1. What is fiat money?

We all deal with fiat money nearly everyday. Well, yep, today a huge number of financial transactions is cashless, whether we buy coffee, top up our phone, pay bills or trade currency on the exchange. This is especially true for the developed countries where cash seems to fade away over the medium term. However, we still use cash. Our pockets still make coin sound and we still have some colored papers in our wallets. And these are fiat money.

Money can be cash or cashless. Cash money include coins and banknotes. While coins are made of metals (or their alloys) – mostly gold, silver, copper, but also brass, zinc, platinum, palladium, etc., banknotes are in fact just colored pieces of paper. Yes, they have protective elements, watermarks and so on, but, nevertheless, banknotes have no physical value. “Fiat” is a Latin word for “decree”, “instruction”. So fiat money is a means of payment, that has a value established by the state. In other words, the value of fiat money is not based on the value of the material that they are made of. The paper used to print 100 dollars banknote certainly is not worth 100 dollars. However, the state determines the face value of this paper, and tells everyone that this piece of  paper should be worth 100, another one – 50, another one – 20 and another one – ten. So fiat is actually a symbolic money with no physical value that we are obliged to use as means of payment.

Fiat money is not only paper banknotes. There is also so-called token money or token coins. Their metal value is less than a legal value determined by the state. These are, for example, American coins with a nominal less than one dollar – daim (10 cents), quarter (25 cents) and half (50 cents).

2. A Brief History of Fiat Money

Monetary systems of ancient states and communities were often based on coins that had the same value that the amount of metal they were made from. However, there are also many examples of token coins. Those were often silver coins that were minted with the use of some other metals, thereby actually reducing the physical value of the coin, while its face value retained. Scientists agree that the first known paper money appeared in China in the 8th century. Later, their use developed under the rule of the Song dynasty in the 11th century, and they became widely spread during the Yuan dynasty (13-14 centuries), when the Mongols led by Genghis Khan’s grandson Kublai  conquered the Middle Kingdom.

Long after that fiat money close to those we have today started appearing in England. Bank of England started issuing paper banknotes. By that time banknotes already existed, however, they were not used as means of payment. In fact, they were bank bills that banks gave to depositors, taking a certain amount of money in gold coins. If that was not a nominal note, then it could pass from hand to hand and had no connected with its original owner. Later they became means of payment backed by an equivalent amount of gold. In such a system, the amount of money that was in circulation was equal to the amount of gold deposited in banks. But, as capitalist relations developed, England’s economy required bigger amount of money in circulation, so the central bank started issuing paper banknotes that were not backed by a supply of gold anymore. Nevertheless, in the middle of the 19th century, the government legislatively established the framework of such an issue. It was a certain ratio to the state’s gold reserve. Before World War I, there was a so-called gold coin standard – the amount of fiat money in circulation was provided by a certain number of gold coins stored in banks. Every banknote holder (every owner of fiat money) could potentially exchange their papers for an equivalent amount of gold. After World War I, most of the countries set a gold bullion standard, which meant that banknotes could be exchanged for gold bars weighing 12.5 kg. Everyone who had less money than the price of these amount of gold, had no opportunity to exchange their banknotes for the precious metal. However, banknotes were already backed by goods and circulated in the economy as a means of payment. In the new economic conditions that emerged after World War II, the gold bullion  standard was replaced by gold exchange standard. The United States played a key role there. The country pledged to back the US dollar with a particular amount of gold, given that hundreds of tons of it were accumulated in American vaults. According to that standard only financial regulators of other states had the right to demand the exchange, while the US dollar became a reserve currency. The era of the gold standard ended in the early 70’s, when the US government refused to provide gold at the request of other states. Since then, the international monetary system “was let float freely”. Today, currencies are no longer pegged against gold, they can be freely converted, and the market (supply and demand for a particular currency) plays a significant role in the establishment of exchange rates.

3. Fiat and virtual currency

Today the term “fiat money” is often used in the cryptocurrency community, and often opposed to digital coins. The state i s responsible for the issue of fiat money, it is carried out in a centralized manner by central banks and controlled by state bodies. The rate of fiat money is also set by the state. Cryptocurrency has been considered as an alternative to such centralized and regulated systems. Fiat transactions are managed by financial, tax, banking structures, while cryptocurrency transfers are carried out peer-to-peer without any regulators and intermediaries.

Fiat money and cryptocurrencies have one important common feature – both are not backed by anything. However, in fact, fiat is still backed by goods that can be bought for it. And here is the point where virtual coins have some problems. Even such major cryptocurrencies as Bitcoin or Ethereum still have low liquidity, while other digital coins cannot be used to purchase at least something at all.  Anyway, the cryptocurrency community is confident that this problem lies in the absence of mechanisms, while the demand for digital currencies is and will be rather high, so and their full fledged liquidity is a matter of time.

Today, cryptocurrencies still amount to a relatively small percentage of global assets and cannot compete with fiat money.


Source:https://howmuch.net/

4. Conclusion

So, fiat money is a currency that government agencies declare to be a legitimate means of payment and prescribe to use it at a fixed face value, despite the fact that it has no physical value. Almost all paper money, as well as many coins, are currently fiat money. Fiat is not backed by gold, and today the world economy is actually built on this principle. Cryptocurrency offers an alternative to fiat – decentralized and unregulated payment facilities. However the logic that cryptocurrency is based on is in a way similar to the one that fiat is based on. Unlike the old system, where payment means were pegged against gold, modern fiat money exists in the relatively free market paradigm. Cryptocurrencies went even further, eliminating those elements of strict regulation that remained in fiat money.

Anyway, there are different forecasts related to the future of digital currencies. The cryptocurrency financial system is only developing and can not yet compete with traditional economy and fiat money, of course. Will it be able to do so in the future? Well, the answer is “no” in the short term and “time will tell” in the long term.

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Tether Made It into Top-5 Cryptocurrencies

The king of stablecoins Tether (USDT) is now the 5th biggest cryptocurrency, according to the rating of CoinMarketCap. Although the coin did follow the overall downward trend, it is clearly doing better than EOS and Ethereum. The rating now looks like this:


Source: CoinMarketCap

Despite the jump in the rating, things are not particularly amazing for Tether. The coin is quickly losing holders, since its alternatives (like Gemini Dollar) have way more customer-friendlier conditions.

The crypto industry is turning upside down. Given the level of volatility, the top-5 newcomers might or might not stay there. We remind you:

Stellar Has Outrun EOS and Became the 5th Top Cryptocurrency

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Cryptocurrency Prices Today, December 11: Cryptocurrencies Are Once Again in the Red Zone

crypto prices

Bitcoin, Ethereum, Ripple, Bitcoin Cash, EOS, Litecoin, Cardano, Stellar, IOTA, Dash, Monero: Cryptocurrency prices

According to the online platform Coingecko, Bitcoin (BTC) lost 1.8% over the past 24 hours. The price at the time of writing is $3425 per coin.

Cryptocurrencies are also falling in price:

Bitcoin Cash lost 3.52% over the past 24 hours and costs $99 per coin;

Ripple dropped by 1.43% and is $0.30 in value;

EOS minus 3.41%, and its price is $1.91;

Litecoin decreased by 1.50%, and its rate is $24;

Cardano lost 2.49%, and its cost is $0.029;

Stellar fell by 1.29% and costs $0.11;

IOTA added 2.85%, and its value is $0.24;

Dash lost 3.36%, and its price is $68;

Monero became cheaper at 4.77% and costs $43.

Over the past 24 hours, Ethereum lost 1.43%. The coin exchange rate is $90, according to Coin 360.

The total market capitalization is $110 billion. Bitcoin accounts for 55% of the total volume. In monetary terms, it is $60 billion.

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Top Serials Where Cryptocurrency is Mentioned

Who doesn’t like to relax on the soft couch watching a show after an intense day? The Coin Shark has made a compilation of serials about cryptocurrency, so that your rest will be complemented by benefits.

1. StartUp

This serial opens the compilation of crypto serials for a good reason. This is the first picture, that doesn’t merely deals with digital currency, but contain it in the heart of the plot.

Cybertriller about cryptocurrency, hackers, bankers and mobsters, who are combined in order to change the world. In the picture, instead of the well-known Bitcoin and Ethereum, a fictional digital coin called GenCoin is used.

TV series adviser Brian Stoeckert, expert in risk management and anti-money laundering, in the interview with CNBC said:

“People have heard about digital currency, but they really don’t understand how it operates. They just see it on the headlines,this is one way they can follow a story line and get a unique perspective on it”.

2. Mr. Robot

Sam Esmail created not just an American psychological TV show, but the whole iconic picture, which consists of 3 seasons. The serial is highly appreciated by programmers and those, who are interested in innovations.

The main character Elliot Alderson, played by an actor Rami Malek, leads a double life: by day, he is a cyber security engineer, and by night – a genius hacker. But the double life doesn’t end here!  Elliot has a split personality.

In the serial a fictional cryptocurrency Ecoin is involved, even the famous Bitcoin is mentioned. In one of the episodes, the president of E-Corp or “evil corporation” Philipp Price (the actor Christopher Michael) and a high-ranking official, whom serial fans compare to Jacob Lew, discuss the future of their cryptocurrency and Bitcoin.

“The problem here is hard cash is fading, rapidly, this is the way of the world right now and Bitcoin is spreading and it Bitcoin takes of the wheel all in a world of hell. It is unregulated,it’s already reached its transaction volume maximum and it is part plate control by Chinese miners”.

3. The Big Bang Theory

Popular comedy series, which wins our hearts with edgy sense of humor and thin sarcasm. Many believe, that the target audience of sitcom are just “techs”, since its main characters Leonard Hofstadter and Sheldon Cooper, who were played by Johnny Galecki and Jim Parsons respectively, are talented physics. Nevertheless, the humour doesn’t revolve around the science and the characters get into quite familiar situations for everyone.

The series creators were inspired by cryptocurrency so much, that in 2017 they have devoted the whole episode to it under the name “The Bitcoin Entanglement”. In the serie, the main characters recalled, that they had mined BTC and saved them on a Flash-drive, which was lost 🙂

4. The Simpsons

There is no person, who’ve never heard of The Simpsons. This yellow people are well-known around the world and head of the family Homer, voiced by Daniel Castellaneta, is often cited in comic public groups. And there is no wonder, because in this situational animated comedy you have everything you need in order to get inspired by positivity and get temporarily disconnect from worries.

The cryptocurrency in the serial is mentioned in an episode in 2013. In the serie Krusty the Clown tells, that he is broke, because “All it takes, is a bad luck with a ponies, worse luck in a Bitcoin market, heavy investment in a high and bookmark company”.

Also in the 7 serie, season 25, Bitcoin was depicted on the billboard near the school:

5. Almost Human

You must admit, that it would be weird if a science fiction TV show, events of which develop in 2048, didn’t concern Bitcoin. The creator, J. H. Wyman, wouldn’t make such mistake. True, Bitcoin in the series, is not what we are used to “not seeing”. Here, the first cryptocurrency of nowadays is presented in the form of a large flash drive.

6. The Blacklist

The cryptocurrency has not fully replaced the fiat and a certain percentage of humanity doesn’t even understand what it is. But, others are already bringing clarity to the public about the digital currency. The writers,of “The Blacklist” decided not to invent a new cryptocurrency, but to use the well-known Ripple.

We want to remind you, that recently Ripple has become the second cryptocurrency by capitalization on the market.

7. Billions

This serial is mandatory to view for those, who are involved in finance and closely linked to the economy.

Billions is a melodramatic picture with a dynamic plot. The action of episodes are develop around two largest players in the US financial world – successful businessmen Bobby Axelrod and the Prosecutor of the Southern New York District – Chuck Rhoades.  Chuck knows, that Axe’s fund is maintaining shadow activity, because of that he is constantly looking for and consequently finds compromising evidence. The cast characters – Damian Lewis and Paul Giamatti respectively.

Now Billions – is the best serial about finance. The heroes begin to use cryptocurrency in the third season.

Cryptocurrency also appears in the following series: “The Good Wife”, ”Person of Interest”, ”Blindspot”, ”iZombie”, ”Family Guy”.

We hope that you will not lose the compilation of crypto series from The Coin Shark. In order for this not to happen, share it on social network with friends. Enjoy watching! 🙂  

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You Can Now Pay with Dash at Venezuelan KFC

According to a report made by Forbes, a popular fast food restaurant KFC in Venezuela will now accept Dash cryptocurrency as a means of payment, following the example of Papa Johns and Subway. The innovation will take effect this week.

The first cafe that will accept Dash is the one in the capital city of Caracas, however, it will soon spread all over the country. The representative of Dash in Venezuela, Alejandro Echeverría, states:

Having a globally recognized brand such as KFC accepting dash payments in Venezuela is a great achievement for cryptocurrency and further validation of the continuing trend of dash adoption.”

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Cryptocurrency Prices Today, December 10: BTC and the Rest of Cryptocurrencies Are Trying to Restore Positions

Bitcoin, Ethereum, Ripple, Bitcoin Cash, EOS, Litecoin, Cardano, Stellar, IOTA, Dash, Monero: Cryptocurrency prices

According to the online platform Coingecko, Bitcoin (BTC) gained 1.7% over the past 24 hours. The price at the time of writing is $3484 per coin.

The remaining cryptocurrencies are also in the green zone:

Bitcoin Cash added 1% over the past 24 hours and costs $108 per coin;

Ripple grew by 1.47% and costs $0.31;

EOS plus 10.39%, and its price is $1.99;

Litecoin increased by 0.84%, and its rate is $25;

Cardano added 2.21%, and its value is $0.031;

Stellar gained 2.30% and costs $0.12;

IOTA grew by 2.44%, and its value is $0.24;

Dash added 4.90%, and its price is $72;

Monero became more expensive by 2.58% and costs $47.

Over the past 24 hours, Ethereum added 1.52%. The coin rate is $93, according to Coin 360.

The total market capitalization is $112 billion. Bitcoin accounts for 55% of the total volume. In monetary terms, this is $61 billion.

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What is Common Between Ripple Technology and XRP Token?

In this article, we will focus on the project, which has recently taken the second place in the cryptocurrency rating. Today we will talk about how XRP token is connected with the famous Ripple technology, which should make a revolution in banking sector in the future.

1. Briefly about Ripple cryptocurrency

The Ripple project is in no way just another copy or an improved Bitcoin`s version. The only thing that unites these two coins is the blockchain technology. Let’s clearly define what the Ripple is:

  • There is a system of gateways at the heart of the Ripple network, the performance of which is provided by hundreds of servers. Ripple works through distributed registry technology, but its architecture is completely different from the standard blockchain. The project does not have decentralization, since only those servers that have been approved by the company, are involved in transaction validation.
  • The main task of the project is to ensure a free and fast exchange of assets with minimum fees (0.00001 XRP).
  • The target audience of the project is banking institutions, which can save about $3 for each transaction with the help of Ripple technology. If we consider, that large banks spend millions of transfers per year, this leads to significant savings.

2. What positions does Ripple take now?

In mid-November 2018, the entire cryptocurrency market collapsed sharply. Many coins lost 40-50% of their value in a week. In this situation, XRP token showed relative stability and fell by about 20%. At the same time, Ethereum fell substantially in price. Because of this disbalance, Ripple took the second place in the cryptocurrency rating. For the moment of writing this article, the project`s capitalization is equal to 12.5 billion dollars. The gap from ETH is almost 3 billion dollars.

3. Future forecasts

Let’s talk briefly about prospects for this project, and what XRP hodlers can expect. For a start, it is worth noting that Ripple is a legal entity officially registered in the United States. This is an undeniable advantage for investors. But it should be understood that the Ripple technology used by banks has nothing to do with XRP token. The fact is, that Ripple has three different products (xCurrent, xRapid and xVia). Banking institutions are interested in the first one, and XRP token is directly related to the second one. Therefore, there is no direct correlation between XRP token rate growth and the introduction of Ripple technology into the banking sector.

Some experts say that banks can start using xRapid technology. If this happens, then XRP token will be really useful and needed. But if you go a little deeper into this question, it becomes clear that such a scenario is highly unlikely. In this case, banks will have to buy an intermediate XRP token additionally, which will increase the cost of transactions. Therefore, the vast majority of analysts believe that banks will not take such a step.

But there are still some reasons for token`s price increase:

  • The possibility that banks will shift to xRapid technology. It is unlikely, but still possible.
  • Increasing of customer base.
  • Regular burning of tokens (deflation).
  • Expanded applications (using Ripple technology, you can exchange absolutely any assets).
  • A general trend change on the market, may lead to another sharp rise in the token price.

4. Conclusion

The Ripple Company is a legal entity registered in the United States. It actively cooperates with the leading banks in America, but this does not concern the XRP token.

The coin definitely has a future, so it is better to keep it in cryptocurrency portfolio in a small amount (no more than 5% – 10%). Recently, XRP cryptocurrency firmly entrenched on second place in the global ranking CoinMarketCap.

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