A Detailed Dive Into Stablecoins #013

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Hello great minds,

It is a wonderful opportunity to come before you all today to discuss on an issue if great importance in the cryptospace.

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

We won't be wasting much time today as we dive into the our main topic of the day.

We have been discussing on stablecoin and we have gotten to the stage where we shall make an analysis on fiat currency, please join me as we examine the advantages of fiat currency.

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ADVANTAGES OF FIAT CURRENCY

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In this post, we shall be examining the advantages of Fiat currency, please tag along.

• BANKING SYSTEM:

Fiat currency aids the operation of the banking system in so many ways.

Fiat currency is being used as the basis of financial transaction since it is being recognized as an official medium of payment.

This helps in ensuring a universally accepted and more stable currency within the banking system.

LIQUIDITY

Another way in which fiat currency improves the banking system is through its liquidity nature.

Fiat currency is highly liquid and this helps to aid easy conversion into other assets and also aids smooth financial transactions.

With the liquidity nature of fiat currency, banks can now easily perform some important operations such as lending, payments and withdrawal.

INTEREST AND PROFIT

Another interesting way in which Fiat currency is being used by the banking system is in terms of generating incomes and profits from lending activities.

Fiat currency is widely accepted and trusted by the nation and as such it can be lent out to other organizations in need of it with an interest rate.

FRACTIONAL RESERVE BANKING

It is with the presence of fiat currency that banks are able to participate in fractional reserve banking.

Here the banks work under a fractional reserve system where a fraction of the deposits are kept as reserves and the rest lend out.

This system of operation is only possible because of the trust people have in fiat currency, and as such, they don't withdraw all their funds at once.

FINANCIAL INTERMEDIATION

Another advantage of fiat currency to banking system is that the fiat currency helps the banks to operate as an intermediator between the borrower and the saver.

Here, the banks takes funds from the saver and lend the borrower with interest rate, and this way, the borrower can utilize the money to his benefit and make lots of profit from the borrowed funds.

This helps in the facilitation of economic growth and development because this borrowers will make good use of the funds and become financially stable to employ more citizens.

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CONCLUSION

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Fiat currency is very important in the growth and development of the nation and also the cryptospace in general.

We have examined some advantages of fiat currency and we shall continue some other time.