A major hurdle to the adoption of bitcoin is that while the average person may be at least open to the idea that fiat money is not the ideal, they still struggle to see a difference between fiat money and cryptocurrency. And this lumping together is not just held to the average adopter but includes many brilliant household names such as Peter Schiff and Elon Musk. This widespread conflation of cryptocurrency and fiat currency comes from two vital misunderstandings: a lack of an understanding of what exactly fiat is and a lack of understanding of value’s subjectivity.
If we turn to Ludwig von Mises’s The Theory of Money and Credit, we will discover that it is his definition of fiat that the public lacks. Here Mises defines fiat currency, stating that we may give the name “of fiat money to money that comprises things with a special legal qualification.” It is important to note that Mises does not simply state it to be something other than commodity money while not being credit money. It is not, as the comments above suggest, money without real value. It is money with a special legal qualification. Bitcoin and other cryptocurrencies have no such qualification. In fact cryptocurrencies face the same disadvantage that commodity currencies do in that their very lack of special legal qualification prevents one from using them for certain mandated financial activities such as paying taxes, and cryptocurrencies therefore have to actively compete with an artificially heightened demand for fiat currencies. There is absolutely no special legal qualification that bitcoin receives, and so by this definition it is not fiat currency.