Crypto Currency Vs Fiat Currency
Cryptocurrency vs. Fiat currency
Are you aware of fiat currencies and cryptocurrencies? They both are currencies in one form or the other and are open for public use across the world. But they are both different and distinct in their ways. There is always one group that favors the use of cryptos, while the other has a soft corner for fiat currencies.
In a cashless society- crypto money plays a huge role
If you have a look at the market of the 1970s and 1980s, you will find that cash played the dominant role. But, with the technology change, electronic transactions have become the usual norm. Today, more and more people are influenced in becoming a cashless society. With the progress toward a cashless society, cryptocurrencies have a big role to play.
Cryptocurrency and fiat currency are always at loggerheads
Cryptocurrency and fiat currency are popular types of digital currency, especially when it is about an online transaction. They both are currencies currently in use in the market but have some differences in them. There are a hell lot of hypes that you will hear daily comparing crypto money and fiat money. This article will highlight the difference between the two more comprehensively and clearly.
Differentiating in what the currencies stand for
Before going for the difference between the two, you must understand what they stand for and how they are defined.
Fiat currency is a legal tender that has the support of the central government, and it operates in the physical form. For instance, US dollars, British Pounds, euros, etc. On the other hand, cryptocurrency is a non-legal tender and doesn’t have any backup from the central government or bank.
Hence, the difference between cryptocurrency and fiat currency is noted as follows:
• Crypto-currencies are decentralized and global. No one entity or government controls the currency with its laws and regulations. The Fiat currency is centralized, under the control of the laws and regulations of the banks and government.
• Crypto-currencies have their existence 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 crypto-currencies with a maximum set of them getting supplied in the market. Whereas, fiat money has an unlimited supply as the government and banks are entitled to produce coins and paper money whenever the situation is required.
• Bitcoin and other crypto-type currencies are created by computers, while fiat currencies are issued by the local government and the banks.
• Cryptocurrencies are presented as public and private code pieces. On the other hand, fiat currencies are presented in the form of coins and paper money.
• The value of the cryptocurrencies is not recognized by the supply and demand of the market. Whereas, the fiat currency value is determined by the market regulations of supply and demand.
The different types of crypto and fiat currencies
In the last decade, the popularity of crypto-type currencies has emerged as a huge success. It was in 2009 when Bitcoin was first introduced, and years after several other types of cryptocurrencies emerged. Starting from Litecoin. Dogecoin, Ripple Dash, and Zcash, there is a plethora of them. On the other hand, the fiat currency has rich and ancient roots, with the Great British Pound, which dates back to 775 AD. It is considered the oldest currency in the world that is still in use.
The differences in the anonymity between the two currencies
When you are using fiat currencies, you need to undergo a user identification or verification process. You are asked to upload a recent picture of yourself and some of the required documents to be issued as per the public authorities. You don’t need to undergo any of the required processes with cryptocurrencies. Though your personal information and confidential details don’t get public, but all your transactions are recorded and tracked in both the fiat and the cryptocurrencies.
Fiat currency vs cryptocurrency: transparency level
• The transparency level with the crypto-type currencies is considered to be more. This is because the revenue streams are displayed in a public chain. Everyone can witness their own and others’ transactions.
• The fiat or govt. currencies are not transparent, as there are no public chains to see the revenue streams of the people.
A comparative historical roots
If you compare crypto money with that its counterpart, fiat or government currency, you will find that their existence and creation bring the difference. The Fiat or government currency dates back to its existence as early as 775 AD with the introduction of the Great British Pound. This is why the fiat-type currency is easily accepted by people all over.
On the other hand, the crypto coin was perhaps first introduced only a decade ago, with the introduction of Bitcoin in 2009. The challenge that Bitcoin and other cryptocurrencies face is catching up with the immense popularity and increasing fan base of the fiat currency. Cryptocurrency is no doubt gaining importance and popularity in the economic market, but it has still not been accepted widely in society as the fiat currency.
A comparative history of the two currencies:
• It was in the 11th century when the Chinese Song dynasty was perhaps the first one to issue paper money. It was not allowed to exchange valuables like gold and silver or silk.
• There were Tally sticks that were introduced as a fiat or government currency. 1100 Tally sticks were introduced as a combat for the shortages in gold.
• 1971, was the year when the fiat currency received worldwide recognition. President Nixon introduced it to eliminate the dollar-pegging system for gold.
• It was in 1998 when the idea of an anonymous electronic cash system emerged by Wei Dai. Bitgold-the very first cryptocurrency was created by Nick Szabo, but it didn’t receive as much attention as Bitcoin.
• In 2009, Bitcoin was introduced in the market, which became the first cryptocurrency that was accepted across the globe. In 2011 and after, a series of several other cryptocurrencies were introduced. Some of the popular ones include Litecoin, Dogecoin, Ethereum, Ripple, Zcash, Dash, and so on.
The traits of both the currencies
The potential of the crypto-type currencies and fiat currencies, accessing their traits is important. You will find that in some of the criteria, Bitcoin and other cryptocurrency is superior to the fiat or government currency, and in some cases, the latter surpasses them. It is your call to choose the type of currency (crypto-type currency or fiat-type currency) based on your personal needs and requirements.
Let us compare their traits concerning certain factors.
• Both the crypto coins and fiat-type currencies are interchangeable.
• As per portability is concerned both currencies secure more or less the same position.
• Concerning the non-consumable criteria, cryptocurrency, and fiat-type currency have equal status.
• Crypto-type currencies have high durability as compared to the fiat-currencies which have a moderate level of durability.
• Both the crypto or virtual currencies and the fiat or government currencies ensure secure and safeguarded transactions and exchanges.
• Crypto or digital currencies are highly divisible. On the other hand, fiat-type currencies are moderately divisible.
• In terms of the transaction process, cryptocurrencies are easy and hassle-free. Whereas, on the other hand, the traction process associated with fiat currencies is easy, but not like the cryptos.
• The crypto-based currencies are decentralized and global, unlike fiat currencies that are centralized and function under the laws and regulations of the government.
• The crypto-based currencies have high scarcity, whereas, fiat currencies are unlimited as the government can issue coins and paper money whenever there is a need.
• The crypto-based currencies are based on mathematical algorithms and are programmable. The fiat currencies are not at all programmable.
• The fiat currencies are sovereign, while cryptocurrencies are not.
The process of the functioning of the currencies
You can find the significant differences between the crypto or digital currencies and the fiat currencies in the way they both operate and the transaction process that takes place. They are contrasting in nature. The transfer of money using Bitcoin is very quick, and you don’t need any third-party association.
On the other hand, if you are involved with the money exchange using Fiat-type currency, a mobile wallet is in use. You can exchange an amount of e-money that gets transferred into an equal e-value amount. Both fiat and cryptocurrencies enable you to purchase everything that you desire. But the processes involved are distinct from each other.
Depending on the things you purchase, you will find that one currency form is better than the other. This is your choice.
Is Bitcoin, a cryptocurrency better than the fiat-currency?
The long-term benefits and the capability of Bitcoins is still not established. But it has been predicted by cryptocurrency gurus and experts, that they will go a long way, especially in revolutionizing the way online transactions are done. In the current market, Bitcoin is mainly included in online casinos and gambling, but it is not limited to it.
Furthermore, when you compare the fiat currencies, Bitcoin allows you to seize the power and authority from the banks and the government since it is not controlled. The cryptography-based currency can create or come up with free market capital. Fiat currencies are affected by inflation and changes in the market, unlike crypto-based currencies. Such aspects make individuals believe that cryptograph-based currencies will soon take over mainstream currencies and bring a transformation in the way money is used.
Why are Bitcoins considered to be a better aspect than fiat-type currencies?
• Bitcoin allows you to re-create free market capitalism.
• The power of controlling the money is absolute with the individuals, and not with the banks like the fiat type currencies.
• When there is inflation, Bitcoin is not affected. But the Fiat-type currency will be easier to lose and get affected by it.
• The Bitcoin currency is easy easier to exchange and transfer as compared to the fiat or government currencies.
• The transaction fees involved with Bitcoin are way cheaper and easily affordable.
Cryptocurrencies seem to be a favorable option among the people
Fiat-type currencies are the centralized and legal way of exchanging money. But, cryptocurrencies have acquired immense popularity in the past few years. There will never be anyone who would act as a middleman, like in the case of the banks. Moreover, cryptos are way cheaper and less expensive that conventional fiat currencies.
Send money anywhere directly without waiting for the bank’s approval
You can send money to anyone in the world directly, and it is super fast. The money gets cleared within a few minutes. You don’t have to wait for the traditional clearing and verification processes of the banking systems, which might take up to several days to get a clearance. Since it is decentralized and doesn’t come under the law and regulations of the government, nobody has any power to do anything with your account.
Blockchain technology has a very big role to play
Thanks to cryptocurrencies, give us the power and the authority to become our very own bank and take control of our finances. It is because blockchain technology offers a higher level of sophistication while dealing with finances. Some mainstream financial industries have started incorporating the idea of technology.
