In most definitions and theories, for something to be considered money it needs to be: a store of value, an unit of account and a medium of exchange. Fiat checks all of this boxes, while crypto is on it’s way to.
Mass media more often than not pushes the narrative that crypto will never check all of the before mentioned boxes, because it’s value is speculative and isn’t backed by anything.
This got me curious as to what is fiat backed by. I honestly thought it isn’t backed by anything, but I did manage to find an answer to why we think it’s a secure medium.
Some bits and pieces of history: First paper money was issued in China, by Kublai Khan, and it had value because Khan said so, and people believed in it. First mass adoption of fiat happened in 19th century and was backed by the gold. Banks held gold reserves and issued paper money and metal coins based on the value from the reserves; you could always come in and redeem your fiat for gold.
This lasted for a hot second before banks got greedy and started minting more fiat than they have gold, so governments, instead of punishing banks for this, decided to help them by making a Central Bank where they could borrow more fiat, but this time, fiat was backed by the words and promises of the government.
Governments backed fiat by promising to accept it back, in the form of taxes. Fiat is considered secure and stable because you can pay taxes with it.
This makes me believe that if crypto somehow, sometime starts being accepted as a currency to pay your taxes with, it’s a game over for fiat and some banks (and govs) will be in big, big problems.
Tl’dr: The fact you can pay taxes with fiat is the reason fiat is considered secure and stable, so we gotta find a way to start paying taxes with crypto (or to abolish taxing systems) to spice things up and give crypto some more validation.
Edit: some sources https://www.sciencenews.org/article/money-ancient-origins-debate-mystery?tgt=nr and https://spectrum.ieee.org/at-work/innovation/a-brief-history-of-money
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