> National currencies used to be backed by gold; now they're backed by the nation's resolve to support the currency. Cryptocurrencies are not Ponzi schemes; they can stabilize, while Ponzi schemes collapse. Cryptocurrencies however are backed entirely by convention. One could argue that nations are conventions, but they are bound together by a constellation of motives beyond their currency. Cryptocurrencies are isolated conventions. That is their appeal and their vulnerability.
That is why I object to the way it is common in cryptocurrency circles to refer to national currencies as "fiat".
Before cryptocurrency, there was essentially a dichotomy:
(1) Money that either is a commodity (e.g., gold, diamonds) or is backed by a commodity. This kind of money has intrinsic value aside from its use as money--in a post-apocalyptic collapsed civilization for instance you can still use your gold bars to smash in the skulls of people trying to steal your stash of food.
(2) Money that is backed by agreement that it is money, and that has almost no intrinsic value. Generally this only worked on a large scale if someone big, like the government, agrees that it is money and encouraged others to do so such as by making this the only form of money acceptable for paying debts owed to the government (such as taxes) or for the government to use to pay debts.
Until this century it wasn't really practical to have a large scale type #2 money for general use without it being backed by a government and so the term "fiat money" came to mean the whole of type #2.
Bitcoin and similar cryptocurrencies are type #2 but not government backed. By using the term "fiat" to refer to other type #2 money, it gives the impression that Bitcoin is not type #2. This can lead people into thinking Bitcoin is type #1. I've seen people invest in Bitcoin thinking that they are investing in a gold-like money because of this.
The dichotomy needs to become a trichotomy: (1) commodity money, (2) government-backed fiat money, (3) non-government-backed fiat money.