Fiat Currency
Government-issued currency that is not backed by a physical commodity like gold but rather by the trust and authority of the issuing government. Fiat currencies are the traditional monetary system that cryptocurrencies aim to complement or disrupt, and serve as the primary on-ramp and pricing reference for crypto markets.
“The US Dollar (USD), Euro (EUR), and Japanese Yen (JPY) are fiat currencies. Most people first enter crypto by exchanging fiat for Bitcoin or stablecoins on an exchange.”
Stablecoin
A cryptocurrency designed to maintain a stable value relative to a reference asset, typically the US dollar. Stablecoins provide a way to hold value and transact in crypto without exposure to price volatility. The three main types are: fiat-backed (USDC, USDT — backed by dollar reserves), crypto-backed (DAI — overcollateralized with crypto), and algorithmic (maintaining peg through algorithmic supply mechanisms).
Cryptocurrency
A digital or virtual currency that uses cryptography for security and operates on a decentralized network, typically a blockchain. Unlike traditional currencies issued by governments, cryptocurrencies are not controlled by any central authority and use consensus mechanisms to validate transactions and maintain the integrity of the ledger.
Exchange
A platform where users can buy, sell, and trade cryptocurrencies. Centralized exchanges (CEX) are operated by companies that custody user funds and match orders, while decentralized exchanges (DEX) operate via smart contracts, allowing users to trade directly from their wallets.