0
$\begingroup$

How are these ledgers maintained and who does it? A practical example would be very helpful.

Thank You

Edit: I was learning about the history of money and ledgers. Because Bitcoin is a ledger in the simplest terms. I was applying the same analogy to fiat currency. I was curious about if fiat currency and banking systems also keep track of transactions through ledgers. But was confused about how all those independent ledgers are maintained.

$\endgroup$
3
  • $\begingroup$ Please clarify your specific problem or provide additional details to highlight exactly what you need. As it's currently written, it's hard to tell exactly what you're asking. $\endgroup$
    – Community Bot
    Dec 13, 2021 at 1:43
  • $\begingroup$ The question it’s unclear $\endgroup$
    – Pegasus
    Dec 13, 2021 at 1:48
  • $\begingroup$ @Pegasus I made an edit, please take look if that's helpful $\endgroup$ Dec 14, 2021 at 11:54

2 Answers 2

4
$\begingroup$

Fiat currency is a currency that has value for purely institutional reasons, i.e. you can't use it directly for consumption or production. It has value because economic agents expect it to has value and mandate to get paid in it, e.g. countries mandate residents to pay taxes and perform transactions inside the country in its currency.

Fiat currency is different from other types of money such as commodity money (e.g. gold or silver), whose value comes from the direct use of the commodity, or pre-fiat banknotes that were essentially promissory notes and could be redeemed for a fixed amount of a commodity (again, usually for gold or silver).

Fiat currency doesn't need ledgers. You know who owns the money because the owner physically bears it. Bitcoin needs ledgers because it is a decentralized digital low-trust system. Without a ledger it would be impossible for everyone to confirm that all transactions are legit and there was no double-spend performed. With money double-spending problem doesn't exist, you can't spend money twice because you physically part away with cash when you buy something.

$\endgroup$
3
  • $\begingroup$ Do Banks keep ledgers to keep track of currency, until now what I have learned Is that Central Bank is the one that makes currency, and other banks take notes from Central bank and register that in their ledgers? $\endgroup$ Dec 17, 2021 at 7:27
  • $\begingroup$ In bitcoin new currency is created through mining, the central bank create currency according to supply and demand? $\endgroup$ Dec 17, 2021 at 7:30
  • $\begingroup$ Banks keep ledgers to keep track of deposits and loans. The central bank may create new currency at will, creating new currency is one of the instruments the central bank can use to achieve its goals (these are usually stability, employment and economic growth). The exact effects of printing money depend on the supply and demand for money that are affected by many various factors including the total money supply. $\endgroup$ Dec 18, 2021 at 8:41
2
$\begingroup$

Fiat money is a kind of symbol, which by law people can use to buy more things. Fiat money alone has no intrinsic value, but when used as a medium of exchange, it retains value because the public believes it has it.

Simplifying money has value only because governments say they have it. It then allows people to buy goods without exchanging products for other products.

Money has storage power, which allows a company to use the same "product" to buy new equipment, hire and pay employees, and expand into other areas.

The value of fiat money depends on supply and demand, which in turn depends on interest rates in the country where the money belongs.

The interest rate depends on how a country's economy is shaped and how the country itself is governed (Corporate Finance Institute, 2020). This means that a country facing political instability is likely to have inflated commodity prices and have a weakened currency.

Then people will no longer believe in currency. When the public gains enough confidence in the currency's ability to act as a means of purchasing power, it will work well. The most beneficial feature of document money is the stability of its value, as opposed to some commodities that are volatile in business cycles and periodic recessions.

The financial crises of 2008 have shown that the fiat money system could not stop the recession (Helleiner, 2011). An argument against the stability of fiat money is that the supply of documentary money is unlimited, while for example the supply of gold is not, making gold a more stable type of currency (Senner & Sornette, 2019).

Banks keeps track transactions, Bitcoin is a decentralised Electronic Cash System and anyone is able due to public ledger to see the transactions occurred in the network instead of the banks witch are centralised with private *ledgers.

In centralisation and private ledgers only the central authority is able to query/lookup for x in x, instead of centralisation witch don’t have a central authority and their ledgers are public anyone can query/lookup for x in x.

$\endgroup$
1
  • $\begingroup$ Then how do Ecash systems like Paypal work? Actually, I'm a noob... $\endgroup$ Dec 17, 2021 at 7:24

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.