A Detailed Dive Into Stablecoins #007

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Hello friends,

With a humble heart I happily come before you all to discuss on an issue of great importance in the cryptospace.

I trust you are doing perfectly fine and you are enjoying your activities in the community.

In our last discussion, we examined Important details about fiat collateralized stablecoin, we discussed particularly about the key terms that aids our understanding of fiat collateralized stablecoin.

Please continue with me in this journey as we examine more key terms.

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FUNDAMENTAL CONCEPTS OF FIAT COLLATERALIZED STABLECOIN

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As stated earlier, there are key fundamental of fiat collateralized stablecoin.

These key words aids in understanding the concept of fiat collateralized stablecoin and without these keywords, it becomes impossible for one to gain proper understanding.

Explained below are some fundamental needed for the proper understanding of fiat collateralized stablecoin.

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FIAT CURRENCY

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Fiat currency is known to be a fundamental concept in modern finance and it serves as the backbone of the monetary system.

Fiat currency can thus be explained to be money which posseses value because it is being declared to be a legal tender by the government, without having any intrinsic worth of its own.

This concept is quite different from commodity money whose value is derived from the underlying physical commodity such as silver or gold.

In conclusion, we can coin out this features from a fiat currency.

A value of a fiat currency is derived from the government decree of authority.

A fiat currency is declared a legal tender which means that it must be accepted across a country's border as a medium of exchange.

Also, fiat currency has no intrinsic value unlike commodity money.
It is typically a digital entry in a ledger or a piece of paper whose worth is solely based on trust and confidence of people in the government issuing it.

Also, Fiat currency has no fixed exchange rate with any physical commodity.

Economic factors often influences the value of fiat currency, factors such as interest rate, Inflation and government policies.

Only the government and the central back posses the authority to create and issue fiat currency.

This monopoly of power allows for the control of fiat currency so as to regulate it's supply.

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CONCLUSION

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We have examined in full details a key concept of fiat collateralized stablecoin.

We have learnt about fiat currency and some of it's major characteristics.

In our next discussion, we shall be learning about as different type of stablecoin, please stay tuned.