Fiat
Government-issued currency not backed by a physical commodity, used as legal tender in digital asset trading.
What is Fiat?
Fiat currency, such as the US Dollar (USD) or Euro (EUR), derives value from government decree and public trust rather than intrinsic worth like gold, enabling central banks to control supply via monetary policy.
Stablecoins like USDC peg to fiat at 1:1, backed by reserves audited quarterly (e.g., Circle holds $35 billion in USD equivalents), bridging traditional finance to DeFi by minimizing volatility for cross-border transfers costing under $0.01 versus SWIFT’s $25 average.
Related Terms
U.S. Treasury-backed Stablecoin
A digital asset backed by U.S. Treasury securities, offering yield and regulatory alignment.
Bitcoin (BTC)
The first and most valuable decentralized digital currency, created by Satoshi Nakamoto in 2009.
Decentralized Data Marketplace
A platform for trading data assets without centralized control.
Capital Inefficiency
The underutilization of provided liquidity in DeFi protocols, where most capital remains idle across unused price ranges.
Constant Product Formula x\*y=k
The constant product formula, typically x \* y = k, is the mathematical equation used by decentralized exchanges (DEXs) to set token prices and balance liquidity pools for automated trading.
CDP
A collateralized debt position, a smart contract mechanism in DeFi that allows users to borrow digital assets by locking collateral.