Non-fiat

Non-fiat refers to a form of currency or monetary system that is not issued and backed by a government's decree (fiat) but derives its value from other sources. These sources can include intrinsic value (like gold or silver), a promise of future delivery (like a commodity-backed currency), or, more commonly in modern times, community consensus, algorithmic scarcity, and decentralized trust (like cryptocurrencies). non-fiat systems often aim for greater independence from government control and inflation, offering alternatives to traditional centrally-controlled financial systems.

Non-fiat meaning with examples

• Bitcoin, as a non-fiat cryptocurrency, operates on a decentralized blockchain and is not backed by any government. Its value fluctuates based on market demand and the confidence of its users, offering an alternative to government-backed currencies and allowing peer-to-peer transactions across borders. Its limited supply model contrasts with the potentially unlimited issuance capabilities of fiat currency, intended to protect holders' value.
• Historically, gold and silver were used as non-fiat currencies. Their value stemmed from their intrinsic properties, use in industry, and limited supply. Before governments began issuing paper money, these precious metals were a form of exchange that was not subject to government control. Their value didn't rest on legal decree and instead stemmed from their inherent value.
• Some communities use local exchange trading systems (LETS) which are non-fiat, based on mutual credit. LETS don't rely on a central bank and operate by members exchanging goods and services directly, keeping track of credit and debits without requiring governmental backing. The value is therefore created between community members and in the social interaction it fosters.
• Commodity-backed currencies represent another type of non-fiat system. These are backed by reserves of physical commodities, like silver, to provide a tangible guarantee of value. They are not controlled by any government, and the value is set, in part, by supply and demand of the underlying commodity and the reserves.