A Bitcoin exchange allows users to buy and sell Bitcoin with other virtual currency or
fiat currency.
The third conclusion is that introduction of Euro versus keeping local currencies could not be clearly argued because one
fiat currency will replace another one.
It was originally linked to the German ostmark at a 1:1 ratio--a currency that, although it was a floating
fiat currency after World War I, was not obviously worse than the other (then-floating) major international currencies of the day, and had the advantage of locality.
Unlike
fiat currency, virtual currencies are not regulated by any single authority.
Consider, first, the conditions existing in an early commodity-based system, prior to the adoption of a universal
fiat currency, where false coins circulate alongside genuine silver.
Until governments around the world stop spending beyond their means, running huge deficits, incurring massive debts and creating endless amounts of
fiat currency, precious metals will continue to rise and
fiat currency values will continue to erode.
There's all kinds of talk, including setting up a new international
fiat currency "with the loss of US sovereignty in total.
And, if and when we in the future turn away from our present use of
fiat currency and embrace once again commodity money, if we voluntarily move toward another of these other options instead of gold, such advocates would be equally satisfied.
The dollar has since fully supplanted gold as the foundation of the world's monetary system; a feat unprecedented in world history for a completely uncollateralized
fiat currency.
This creates the classic rate of return dominance problem of valued
fiat currency money.
By contrast, traders who consider switching from a domestic to an alternative
fiat currency as a medium of exchange find that there is no simple common metric.
Some results are new, however, especially those concerning the conditions for
fiat currency to have value in equilibrium.
