Fiat
In short: Fiat is traditional government-issued currency, such as the US dollar, the euro or the Turkish lira.
Fiat is traditional government-issued currency, such as the US dollar, the euro or the Turkish lira. Its value is not backed by a commodity like gold but rests on law, on trust in the issuing state and its central bank, and on its wide acceptance for payments and taxes.
Why it matters
In crypto, fiat is the bridge between the traditional financial system and digital assets. Many people first buy crypto with fiat, through a bank transfer or card payment, and convert crypto back into fiat when they withdraw to a bank account. Many stablecoins are designed to track a fiat currency, most often the US dollar. The supply of fiat money is managed by central banks, while many cryptocurrencies follow issuance rules written into their code.
Example
A user sends euros from their bank account to an exchange, which credits the balance once the transfer arrives. They use those euros to buy bitcoin. Later they sell part of the bitcoin for euros and withdraw the fiat back to the same bank account; the routes in and out are often called a fiat on-ramp and off-ramp.