What is a FIAT currency?

Fiat money is money (such as paper currency) not convertible into coin or specie of equivalent value. Instead it is a currency, which is declared by a government to be legal tender according to Central Banks Guide.

This type of financial system has been a hot debate which I plan on elaborating on in future posts. The transition into a new financial system would need to go through a phase of handling fiat first. For now, all you need to know is Fiat is synonymous with central banking money.

Why do we need fiat tokens?

Currently we use M1, M2, M3, the Fed’s balance sheet, Treasury Bonds, Gross Domestic Product, and Consumer Price Index as methods of measuring the current economy. It allows us to measure supply and demand of a countries currency. Most of our current money supply is already digital.

There is one problem. A digital fiat number is not the same as a digital fiat token that can be traded on a market. The banks agree to transfer value, but it’s just moving numbers not actual property the same way a token is. Instead of the banks publishing their information the fed can just look at the current state of the blockchain.

I think the service providers that previous handled the infrastructure of payment processing will have to switch their models of business to adapt to crypto-blockchain bases system eventually. The financial system as a whole will move to adapt of course.

How will the fed make this work?

The currency needs to be able to be taken in and out of circulation for it work. The central banks would be a group of economists who study the macroeconomic models. The banks would use decentralized exchange systems such as the one OmiseGo and focus on providing clients with financial services. The Dodd-Frank in my opinion should be regulated during this transitional period. The central banks should remain sovereign from political changes. The boom and bust cycles of the economy are mostly driven by companies so proper regulation on companies will keep the economy more stable.

A big criticism of fiat is that it is backed by nothing and has no intrinsic value. I beg to differ. The intrinsic value of the fiat currency is the Central Banks promise to support it. With a cryptocurrency the support for the currency can be written into the system using a smart contract. The rules of the currency will be decided by a committee of economists but enforced through a smart contract. That smart contract is the intrinsic value.

The next criticism is central banks are unnecessary. I also disagree. Consumers and citizens tend to be myopic and lacking in self-awareness especially in low income communities that lack proper financial education. They need safe guards implemented by economists to prevent them from hurting themselves or the community.

I hope this article was helpful in answering any questions you had as well as guide to ask better questions. Please subscribe here to our newsletter to receive helpful information like this as well as future posts. Also make sure to share this article on social media to help inform others just like yourself.

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Posted from my blog with SteemPress : https://lifestonellc.com/uncategorized/digital-fiat-currency-tokens/

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