Crypto currency vs. fiat currency
Are you familiar with fiat currencies and crypto currencies? Both are currencies in one form or another and are open for public use worldwide. But both are distinct and different in their own ways. There is always one group that favors the use of cryptocurrencies, while another has a soft corner for fiat currencies.
In a cashless society – crypto money plays a huge role
If you look at the market in the 1970s and 1980s, you will see that cash played a dominant role. But with the change in technology, electronic transactions have become the norm. Today, more and more people are influenced to become a cashless society. With the progress towards a cashless society, cryptocurrencies have a big role to play.
Crypto currency and fiat currency are always at odds
Cryptocurrency and fiat currency are popular types of digital currencies, especially when it comes to online transactions. Both are currently used currencies in the market, but they have some differences in them. There are a hell of a lot of commercials you will hear on a daily basis comparing crypto money and fiat money. This article will highlight the difference between them in a more comprehensive and clear way.
The difference in what the currencies represent
Before starting to differentiate between them, you need to understand what they represent and how they are defined.
Fiat currency is a legal tender that is backed by a central government and operates in physical form. For example, US Dollars, British Pounds, Euro, etc. On the other hand, cryptocurrency is not legal tender and does not have any backing from a central government or bank.
So, the difference between cryptocurrency and fiat currency is noted as follows:
• Cryptocurrencies are decentralized and global in nature. There is no single entity or government that controls the currency with its own laws and regulations. Fiat currency is centralized, under the control of the laws and regulations of the banks and the government.
• Cryptocurrencies exist only in the digital domain. On the other hand, you will find that fiat currencies have a tangible and physical existence.
• There is a limited supply of cryptocurrencies with a maximum set of them being supplied to the market. Whereas, fiat money has an unlimited supply because the government and bank have the right to produce coins and paper money whenever needed.
• Bitcoin and other cryptocurrencies are created by computers, while fiat currencies are issued by local government and banks.
• Cryptocurrencies are represented as public and private pieces of code. On the other hand, fiat currencies are presented in the form of coins and paper money.
• Market supply and demand do not recognize the value of cryptocurrencies. While the value of fiat currency is determined by market regulations of supply and demand.
Different types of crypto and fiat currencies
In the last decade, the popularity of cryptocurrencies has proven to be a huge success. It was in 2009, when Bitcoin was first introduced, and years after several other types of cryptocurrencies emerged. Starting with Litecoin. Dogecoin, Ripple to the Dcash and Zcash, there are tons of them. On the other hand, fiat currency has rich and ancient roots, with the Great British Pound, dating back to 775 AD. It is considered the oldest currency in the world that is still in use.
Differences in anonymity between the two currencies
When using fiat currencies, you must go through a user identification or verification process. You are required to upload a recent picture of yourself and some of the required documents that will be issued by the public authorities. You don’t have to undergo any of the necessary processes with cryptocurrencies. Although your personal information and confidential details do not become public, but all your transactions are recorded and tracked in fiat and crypto currencies.
Fiat Currency vs. Crypto Currency: The Level of Transparency
• The level of transparency in crypto-type currencies is considered to be higher. This is because the revenue streams are shown on the public chain. Anyone can witness their own and other people’s transactions.
• Fiat or others. currencies are not transparent, because there are no public chains to see people’s income streams.
Comparative historical roots
If you compare crypto money with that of its counterpart, fiat or government currency, you will see that their existence and creation make a difference. Fiat or national currency dates its existence back to 775 AD with the introduction of the Great British Pound. This is why fiat currency is easily accepted by people around the world.
On the other hand, crypto coin may have been introduced for the first time only ten years ago, with the introduction of Bitcoin in 2009. The challenge that Bitcoin and other cryptocurrencies face is to catch up with the huge popularity and growing fan base of fiat currency. . Crypto currency is undoubtedly gaining importance and popularity in the economic market, but it is still not widely accepted in society as fiat currency.
Comparative history of the two currencies:
• It was in the 11th century, when China’s Song dynasty was perhaps the first to issue paper money. It was not allowed to exchange precious things like gold and silver or silk.
• There were tally sticks that were introduced as fiat or government currency. 1100 Tally sticks were introduced to fight the shortage of gold.
• 1971 was the year when fiat currency gained world recognition. President Nixon introduced it to eliminate the system of pegging the dollar to gold.
• It was in 1998, when Wei Dai came up with the idea of an anonymous electronic cash system. Bitgold-the first cryptocurrency was created by Nick Szabo, but it has not received as much attention as Bitcoin.
• In 2009, Bitcoin was introduced to the market, becoming the first cryptocurrency to be accepted worldwide. In 2011 and beyond, a number of other cryptocurrencies were introduced. Some of the popular ones include Litecoin, Dogecoin, Ethereum, Ripple, Zcash, Dash and so on.
Features of both currencies
The potential of crypto and fiat currencies, access to their features is important. You will find that by some criteria Bitcoin and other cryptocurrencies are superior to fiat or government currency, and in some cases the latter outperforms. It is up to you to choose the type of currency (crypto currency or fiat currency) based on your personal needs and requirements.
Let’s compare their features in relation to certain factors.
• Both crypto coins and fiat currencies are fungible in nature.
• In terms of portability, both currencies ensure more or less the same position.
• In terms of non-consumable criteria, crypto-currency and fiat currency have equal status.
• Crypto currencies have a high durability compared to fiat currencies which have a moderate level of durability.
• Both crypto or virtual currencies and fiat or government currencies ensure safe and secure transactions and exchanges.
• Crypto or digital currencies are highly divisible in nature. On the other hand, fiat-type currencies are moderately divisible.
• In terms of the transaction process, cryptocurrencies are simple and hassle-free. While, on the other hand, the withdrawal process associated with fiat currencies is easy, but not as with cryptocurrencies.
• Cryptocurrency-based currencies are decentralized and global in nature, unlike fiat currencies which are centralized and operate under government laws and regulations.
• Cryptocurrency-based currencies have a high scarcity, while fiat currencies are unlimited because the government can issue coins and paper money whenever the need arises.
• Cryptocurrency-based currencies are based on mathematical algorithms and can be programmed. Fiat currencies are not programmable at all.
• Fiat currencies are sovereign in nature, while cryptocurrencies are not.
The process of functioning of currencies
You can find significant differences between crypto or digital currencies and fiat currencies in the way they both work and the transaction process that takes place. They are contrasting in nature. Transferring money using Bitcoin is very fast and you absolutely do not need any third party.
On the other hand, if you are involved in exchanging money using fiat type currency, a mobile wallet is in use. You can exchange the amount of e-money being transferred into an equal amount of e-value. Both fiat and cryptocurrencies allow you to buy anything you want. But the processes involved are absolutely different from each other.
Depending on the things you’re buying, you’ll find that one form of currency is better than another. This is absolutely your choice.
Is Bitcoin, a cryptocurrency, better than fiat currency?
The long-term benefits and capability of Bitcoin are still undetermined. But cryptocurrency gurus and experts predict that they will come a long way, especially by revolutionizing the way online transactions are done. In the current market, Bitcoin is mainly involved in online casinos and gambling, but it is not limited to it.
Moreover, when you compare fiat currencies, Bitcoin allows you to take power and authority from banks and government since it is not controlled. A cryptographically based currency has the ability to create or design free market capital. Unlike crypto-based currencies, fiat currencies are affected by inflation and market changes. Such aspects lead individuals to believe that crypto-based currencies will soon take over mainstream currencies and bring about a transformation in the way money is used.
Why is Bitcoin considered a better aspect than fiat currencies?
• Bitcoin gives you the opportunity to recreate free market capitalism.
• The power to control money rests absolutely with individuals, not with banks as with fiat currencies.
• When there is inflation, Bitcoin is not affected. But fiat type currency will be easier to lose and be influenced by.
• Bitcoin currency is easier to exchange and transfer compared to fiat or government currencies.
• Transaction fees related to Bitcoin are much cheaper and easily affordable.
Cryptocurrencies seem to be a favorable option among people
Fiat currencies are a centralized and legal way of exchanging money. However, cryptocurrencies have gained immense popularity over the past few years. There will never be anyone to act as an intermediary, as is the case with banks. Moreover, cryptocurrencies are much cheaper and cheaper than conventional fiat currencies.
Send money anywhere directly without waiting for bank approval
You can send money to anyone in the world directly, and it’s super fast. Money clears within minutes. You don’t have to wait for the traditional clearing and verification processes of banking systems, which can take several days to get approved. Since it is decentralized and not subject to government laws and regulations, no one has the authority to do anything with your account.
Blockchain technology has a very big role
Thanks to cryptocurrencies, it gives us the power and authority to become our own bank and take control of our finances. This is due to the blockchain technology that offers a higher level of sophistication while dealing with finances. In fact, there are some major financial industries that have begun to incorporate the idea of technology.