What Is Currency?
Currency is a means of exchange that determines value based on the geographical location of the governing authorities responsible for its maintenance. It refers to money in any form that is currently in circulation or used as a medium of exchange, such as banknotes and coins. Currency can also encompass the monetary system commonly used within a nation.
Currency primarily consists of paper and coin money used by a country for conducting business. For instance, the United States utilizes dollars, quarters, nickels, dimes, and pennies as its currency. Additionally, currency can also indicate that something is accepted or used as a medium of exchange.
In the realm of cryptocurrency, currencies are classified in two ways:
Cryptocurrencies – These are digital or virtual currencies that utilize cryptography for security. This ensures that they are highly resistant to counterfeiting and double-spending. Many cryptocurrencies are built on decentralized blockchain technology, which serves as a distributed ledger enforced by a global network of computers.
Fiat currencies – Fiat currencies, also known as fiat money, are government-issued currencies that are not backed by a commodity. Central banks have greater control over the economy with fiat money as they can determine the amount of currency to be printed. Examples of fiat currencies include USD, EUR, and AUD.