Fiat Currency
Fiat currency is perhaps the most familiar type of money in today’s world. It’s the currency declared legal tender by a government, but it’s not backed by a physical commodity like gold or silver. Instead, its value is derived from the trust and confidence people have in the government that issues it. Examples include the US dollar, the Euro, and the British pound.
Commodity Money
In contrast to fiat currency, commodity money has intrinsic value because it’s made of a valuable commodity. Historically, this included items like gold, silver, and other precious metals. The value of commodity money is determined by the market value of the underlying commodity. While less common today, commodity money played a significant role in ancient economies.