📉 How to combat the devaluation of FIAT currencies
blockchain

📉 How to combat the devaluation of FIAT currencies

By Stuart Hollinger | DeFiKnowledge | 25 Mar 2021


a study into the devaluation of FIAT — Stuart


A large issue with fiat currencies is that most of the money is not physical. Fiat money is usually kept in a bank account and is created by a bank. A huge amount of the world’s money is not held by physical notes or coins but instead stored in the form of electronic numbers. The problem that arises is that it is not backed by anything physical, which can lead to a devaluation of the currency. Cryptocurrencies such as Bitcoin are backed by the blockchain. This means that all transactions and prices are transparent, and there is no risk of inflation.

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It is easy to send and receive money. The transfer of money through banks takes a lot of time. There is a lot of paperwork involved and it is a very lengthy process. When it comes to cryptocurrencies, the process is much quicker. This is because there is no need for a third party to verify a transaction. This is done through the use of the blockchain, and it is a very secure system that verifies and records the exchange.

It is easy to make payments. Fiat currencies are much easier to use, but cryptocurrencies also have their own advantages that make it very easy to make payments. Transactions can be done using the blockchain, and there is no need for the recipient to receive a physical thing. This will make it much easier for merchants to accept cryptocurrency payments. The blockchain is also a secure system that can be used to send money.

It can be used in remote areas. Fiat money is very difficult to use in remote parts of the world simply because there are no banks and ATMs in these areas. Cryptocurrencies can be used in these areas since it does not need a bank or an ATM to work. The blockchain is a system that is completely decentralized, which makes it easy to use anywhere in the world.


The devaluation of a currency can be combated with various measures.

It is in the interest of a country to have a sound economy, a strong currency, and a favorable balance of trade. This can be achieved by ensuring that the country’s exports are greater than its imports. By doing this, the country would earn more foreign exchange. Also, the country can expand its export market by participating in trade fairs and exhibitions. In addition, the country can attract more foreign investments. However, if a country has a high level of debt, then it will be difficult to ensure that the country’s debt is paid. This is because the interest rate will increase. This will lead to a higher debt payment. As a result, the country will not be able to pay its debt. This can lead to a devaluation of a currency. Countries with a sound economy and better financial management will be better able to prevent a currency devaluation.

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What are the benefits of Currency Devaluation?

Currency devaluation can have various benefits. First, it can help a country to reduce its current account deficit. This can be achieved by increasing exports and reducing imports. The result is a reduction in the trade deficit. This can also help to increase the foreign exchange reserves. The country can then use foreign exchange for importing goods that are needed. Another benefit of a currency devaluation is that it can reduce the price of exports. This is because the demand for imports will decrease. If the price of exports decreases, this will stimulate exports. As a result, the country will earn more foreign exchange. Currency devaluation also helps to increase the value of the country’s real estate. As more FIAT is produced, physical assets with a fixed supply, or a supply that takes a long time to increase (such as the construction of houses) gain a positive pressure for the price increase.

What are the disadvantages of Currency Devaluation?

Currency devaluation can have various disadvantages. If a country is in a recession, then it will not be able to grow its economy. This is because a devaluation will increase the price of imports. This will reduce the disposable income of consumers. As a result, it is unlikely that consumers will spend more money on consumption. As a result, the country will not be able to grow its economy. If a country’s exports decrease, then this will reduce the country’s foreign exchange earnings. As a result, it is likely that the country will have to borrow more money from foreign countries. However, if the country has a large level of debt, then it may not be able to borrow more money. As a result, the country will not be able to repay its debt. This can lead to a country defaulting on its debt.

FIAT currencies are complex, especially when you start to realize the effect and interoperability of imports and exports on currency valuations.

Thanks for reading! :)


 

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Stuart Hollinger
Stuart Hollinger

Stuart Hollinger — Head of Marketing @ YSL.io | Technical Writer @ JigStack.org I love all things Cryptocurrency and Decentralized Finance and use this page to write about what I want!


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