this post was submitted on 20 Jan 2026
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In the absolute most simple explanation possible I can give:
Non-fiat= Currency that can be directly translated to a certain universally valuable good at anytime (i.e. gold, silver), either through reserves or the money itself being made of said material (coins). The concrete measure of wealth helps gives investors and whoever else confidence that your government won't go bankrupt.
Fiat= Currency that's worth something because the government says it is. Look at us, we are big, our military is strong, don't you trust we will always be powerful, wealthy and stable? You better or else we send that military after you if you put our financial solvency into question. Notably used by the Mongol Yuan Dynasty and the US today.
Another thing that gives fiat money value (at least domestically) is that the state will only accept tax payments in its own currency. Those taxes, which remove money from circulation, also moderate inflation. The sovereign’s debt is the money in the economy[^1], which is why it’s in no one’s interest for the sovereign to pay off its debt.
[^1]: There’s also money created by private banks, with permission from the sovereign, by writing loans.