Money Taxonomy

Fiat money does not have use value. It has utility as a money only because people are willing to trade for it. These people may and often do include an issuing state, though this is not a distinguishing characteristic. The name derives from the fact that it is simply "declared by fiat" to be a money. However such a declaration is also not a distinguishing characteristic. Fiat is simply money without use value. Money with use value is referred to as commodity money.

While value is subjective, making it impossible to distinguish in practice, the classification itself is clear. Account-based electronic money has no use value. Paper money can be burned for heat, but this is typically not considered a material use value. Bitcoin can be used for timestamping, but this is also not typically considered a material use value. Gold is generally considered to have material use value, presumably prior to its use as money. Further discussion relies on the above common treatments.

A money substitute is a contractual claim to a definite amount of money, redeemable on demand. As such a money substitute represents a "future good" while money is a "present good". Fiat is not a money substitute because it is not redeemable on demand for any definite amount of money, it is the money itself. Debt is often securitized and guaranteed such that it trades at par with another money, such as gold or fiat. Given that value is subjective, it is also not possible to distinguish whether a person values the redemption, or the claim itself, but the assumption is generally that the redemption is valued and that the document it is written on.

Representative money is often misinterpreted as a present good, yet because it is a claim (to what it represents), it is a money substitute. The gold-backed U.S. Dollar was a money substitute and the modern U.S. Dollar is fiat. All account-based U.S. Dollars are money substitutes, just as all custodial Bitcoin accounts represent money substitutes. These are promises to redeem in Dollars or Bitcoin respectively. The dollars that one can hold in one's hand are fiat, just as are the Bitcoin that one can spend with one's private keys.