This is fiat money issued by a government. It is not backed by a physical commodity, like gold or silver, but rather by the government that issued it.
The value of fiat money is determined by the relationship between supply and demand and the stability of the issuing government. Most modern paper currencies are fixed currencies, including the U.S. Dollar, the Euro and other major world currencies.
The word FIAT is Latin in origin and refers to an arbitrary order issued by a government or other authoritative figure. Central banks control the economy because they control the amount of money printed. One of the dangers of fiat money is that governments print too much of it, which leads to hyperinflation.
Currently, a large amount of fiat money is being injected into the economy on a regular basis, with long-term consequences for its real value.
Previously, fiat currency was backed by gold, and it allowed citizens to exchange currency for government gold, but this has ended in many countries. Most cryptocurrency investors have lost confidence in fiat currency because of this. Indeed, the Dollar and Euro are now as virtual as Bitcoin.
