Fiat vs Crypto Assets: A True Reflection of a Monetary Revolution

What exactly is fiat? A straightforward version

The US dollars, euros, and renminbi in your pocket? That's fiat. The value of this money is not because it is backed by gold, but because the government says it is valuable—it's that simple. If the government's credit is good, the currency is valuable; if the government's credit collapses, the money becomes worthless. 99% of countries worldwide use this system to buy groceries, invest, and save.

Historical Truth: How Fiat Rules the World

China was the first to play this game: In the 11th century, Sichuan began issuing paper money, which could initially be exchanged for silk and gold. By the time of Kublai Khan (the 13th century), it had evolved into a complete fiat currency—what was the result? Historians say this thing inflated into a big bubble, ultimately leading to the economic collapse of the Mongol Empire.

Europe has also tried: In the 17th century, Spain, Sweden, and the Netherlands all wanted to learn, but Sweden directly collapsed and shamefully reverted to a silver standard. After the founding of the United States, there were also experiments, resulting in a complete mess.

The turning point has arrived: In 1933, the U.S. government announced that it would no longer exchange paper money for gold. In 1972, Nixon directly announced the global abandonment of the gold standard — from that moment on, fiat ruled the world.

Gold Standard vs Fiat: Two Opposing Systems

Gold Standard Era (now outdated):

• Your fiat is indeed backed by gold.
• Does the government want to print money? Sorry, there isn't that much gold in the vault, so it can't be printed.
• Liquidity is tightly locked, and the economy is inflexible.

Fiat Era (Now):

• The government can print money at will, as long as there is a credit guarantee.
• Encountering an economic crisis? Flooding the market, quantitative easing, manipulating interest rates, there are many tools available.
• The cost is: the government has the right to issue excessively, leading to inflation, or even hyperinflation.

Who is more stable? Have you seen the 2008 financial crisis? Back then, it was impossible to save the market under the gold standard. Fiat has its risks, but its flexibility is unmatched.

The Real Advantages and Disadvantages of Fiat (No Nonsense Version)

Advantages:

• Not afraid of shortages: print as much as you want, after all, it's backed by credit.
• Cheap: Printing fiat is 1000 times cheaper than mining gold.
• Universally accepted: All countries use fiat, international trade is smooth and enjoyable.
• Easy to carry: No need to hoard gold like under the gold standard, and rent warehouses or hire bodyguards.

Disadvantages:

• Essentially worthless: there is no physical asset backing it, entirely reliant on confidence.
• Many people have been harmed throughout history: Venezuela, Zimbabwe, Argentina… There are numerous cases of hyperinflation caused by the overissuance of fiat.
• Concentration of power: central banks hold the power of life and death.

Fiat vs Cryptocurrency: The Real Showdown

Similarities: Neither has physical backing.

Essential difference:

Key Differences: Fiat is manipulated by central banks, while cryptocurrency is run by algorithms. One relies on face value (government credit), while the other relies on code (mathematical rules).

What will the future hold?

Fiat has dominated for 500 years, but history shows that no financial system is eternal. Although cryptocurrency is still young, and the market is small and volatile, it represents a completely new approach: ensuring value through technology rather than power.

The original intention of Bitcoin is not to overthrow the fiat system, but to provide a decentralized alternative. The most likely scenario for the future is: two systems coexist — fiat continues to be used for daily consumption and international trade, while cryptocurrencies gradually become an important part of asset allocation and future finance.

The question now is not who will win, but rather at what speed this monetary revolution will change the world.