Fiat money is inconvertible, meaning that it is not convertible into nor backed by any commodity. It serves as legal tender by decree, or fiat, of the government. Its value is based on trust--specifically that others will accept it in payment for goods and services and that its value will remain relatively stable.
This trust is based, in part, on laws that make the fiat money “legal tender” in the payment of taxes and, in the 3 United States, also in the payment of private debts. Fiat money consists of both paper currency and metal coins the face value of which exceeds the value of the metal content of the coins.