Fiat or fiat money is a currency that a government has declared to be legal tender, but it is not backed by a physical commodity. The value of fiat money is derived from the relationship between supply and demand rather than the value of the material from which the money is made. Fiat money only has value because the government maintains that value, or because two parties agree on said value. Fiat money was first introduced as an alternative to commodity-backed money.
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