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Although gold and Bitcoins are sometimes used to pay ETH for goods and services, they are most often held as speculative investments and as a hedge against inflation. When the economy is overheating, then the central bank can contract the money supply, which throttles the economy to a safer pace. During the age of the Internet, privacy became important to many people, especially the privacy of their financial transactions. Furthermore, many people wanted to perform financial transactions without the mediation of a third party, such as banks. Banks earned a bad reputation during the Great Recession of 2007 to 2009, since they were a major cause of the economic downturn. This new currency was called Bitcoin, the 1st of the cryptocurrencies of which there are now thousands.<\/p>\n<\/p>\n
The increased prevalence of bubbles is because fiat currencies have a virtually unlimited supply, which means that quantitative easing is an option for governments. While possibly providing stimulus to an economy, quantitative easing can also cause greater inflation rates. This could impact anything from housing prices to national debt levels, which in turn could impact the financial markets. Fiat and commodity money are different because commodity money is backed up by the intrinsic value of the commodity from which it is made and fiat money is only backed by government authority. For instance, gold coins are worth even when not used as money.<\/p>\n<\/p>\n
\nIf you increase the money supply but don’t increase the amount of the standard backing it. This is one of the big advantages of fiat money vs commodity money.<\/p>\n
— Warren is a Serial Liar \ud83d\udc0d\ud83d\udc0d\ud83d\udc0d (@dave_dortmund) March 23, 2020<\/a><\/p><\/blockquote>\n