Cryptocurrency vs. Fiat Currency
Do you know the fiat currencies and the cryptocurrencies? Both are currencies in one form or another and are available to the public worldwide. But they are both different and different in their own way. There is always one group that favors using cryptos, while the other has a soft corner for fiat currencies.
Cryptocurrency plays a big role
If you look at the market in the 1970s and 1980s you will see that cash played the dominant role. But with technological change, electronic transactions have become the common norm. Nowadays, more and more people are being sell dogecoin in nigeria influenced by becoming the cashless society. With the progress towards a cashless society, cryptocurrencies play a major role.
Cryptocurrency and fiat currency are always at odds
Cryptocurrency and fiat currency are popular types of digital currency, especially when it comes to an online transaction. Both are currencies currently used in the market but have some differences. There are heck of a lot of hypes you will hear on a daily basis when it comes to comparing cryptocurrency and fiat money. This article will highlight the difference between the two more comprehensively and clearly.
Differentiate what the currencies stand for
Before going into the difference between the two, you need to understand what they stand for and how they are defined.
Fiat currency is a legal tender backed by the central government and works in physical form. For example, US Dollars, British Pounds, Euros, etc. On the other hand, cryptocurrency is non-legal tender and has no central government or bank support.
Therefore, the difference between cryptocurrency and fiat currency is noted as follows:
- Cryptocurrencies are decentralized and global in nature. There is no entity or government that controls the currency with its laws and regulations. Fiat currency is centralized and subject to the control of banking and government laws and regulations.
- Cryptocurrencies exist only in the digital realm. 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 amount of them being offered on the market. While the fiat money is unlimited as the government and bank are authorized to produce coins and paper money whenever the situation calls for it.
- The bitcoin and other crypto-like currencies are created by the computers, while the fiat currencies are issued by the local government and banks.
- Cryptocurrencies are represented as public and private pieces of code. On the other hand, the fiat currencies are presented in the form of coins and paper money.
- The value of cryptocurrencies is not recognized by market supply and demand. While the value of fiat currency is determined by the market rules of supply and demand.
The different types of crypto and fiat currencies
Over the past decade, the popularity of crypto-like currencies has turned out 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 plenty of those. On the other hand, fiat currency has rich and ancient roots , with the Great British Pound dating back to 775 AD. It is believed to be the oldest currency in the world still in use.
The differences in anonymity between the two currencies
When using the fiat currencies, you must undergo a user identification or verification process. You will be asked to upload a recent photograph of yourself and some of the required documents that must be issued by the authorities. You do not have to undergo any of the required processes with the cryptocurrencies. Although your personal information and confidential details do not become public, all your transactions are recorded and tracked in both fiat and cryptocurrencies.
Fiat currency vs. cryptocurrency: level of transparency
- The level of transparency in crypto-like currencies is considered to be higher. This is because the revenue streams are displayed on a public chain. Everyone can witness their own and others’ transactions.
- The Fiat or the government. Currencies are not transparent as there are no public chains to see people’s revenue streams.
A Comparative Historical Roots
If you compare cryptocurrency to that of its counterpart, fiat or government currency, you will find that their existence and creation makes all the difference. The fiat or government currency dates back to 775 AD with the introduction of the Great British Pound. Because of this, fiat currency is easily accepted by people everywhere.
On the other hand, the crypto coin may have only been introduced a decade ago with the launch of Bitcoin in 2009. The challenge facing Bitcoin and other cryptocurrencies is keeping up with the fiat currency’s immense popularity and growing fan base. Cryptocurrency is undoubtedly gaining importance and popularity in the economic market, but it has still not been widely accepted in society as a fiat currency.
A Comparative History of the Two Currencies:
- It was in the 11th century that China’s Song Dynasty was perhaps the first to issue paper money. It was not allowed to barter with valuables such as gold and silver or silk.
- There were tally sticks introduced as fiat or government currency. 1100 counting sticks were introduced to fight the gold shortage.
- 1971 was the year that fiat currency gained worldwide recognition. President Nixon introduced it to abolish the dollar’s peg system to gold.
- In 1998, Wei Dai came up with the idea of an anonymous electronic payment system. Bitgold – the very first cryptocurrency was created by Nick Szabo but didn’t get as much attention as bitcoin.
- In 2009, Bitcoin was launched, which was the first cryptocurrency to be accepted worldwide. In 2011 and thereafter, a number of several other cryptocurrencies were launched. Some of the most popular are Litecoin, Dogecoin, Ethereum, Ripple, Zcash, Dash and so on.
The characteristics of both currencies
The potential of cryptocurrencies and fiat currencies, accessing their properties is important. You will find that Bitcoin and other cryptocurrencies are superior to fiat or government currency in some criteria and in some cases outperform the latter. It is absolutely your decision to choose the type of currency (cryptocurrency or fiat currency) based on your personal needs and requirements.
Let’s compare their characteristics in relation to certain factors.
- Both the crypto coins and fiat currencies are inherently interchangeable.
- In terms of portability, both currencies more or less secure the same position.
- With regard to the non-consumable criteria, cryptocurrency and fiat currency are equal.
- Cryptocurrency-type cryptocurrencies have high durability compared to fiat currencies, which have moderate durability.
- Both the crypto or virtual currencies and the fiat or government currencies ensure safe and secure transactions and exchanges.
- Cryptocurrencies or digital currencies are highly divisible. On the other hand, fiat currencies are moderately divisible.
- In terms of the transaction process, cryptocurrencies are simple and hassle-free. On the other hand, the traction process associated with fiat currencies is easy, but not like cryptos.
- Crypto-based currencies are decentralized and global in nature, unlike fiat currencies which are centralized and subject to government laws and regulations.
- The crypto-based currencies have high scarcity while the fiat currencies are unlimited as the government can issue coins and fiat money when needed.
- The crypto-based currencies are based on mathematical algorithms and are programmable. The fiat currencies are not programmable at all.
- Fiat currencies are inherently sovereign, cryptocurrencies are not.
The process of functioning of currencies
You can tell the significant differences between the crypto or digital currencies and the fiat currencies by how they work and the transaction process that takes place. They are naturally high in contrast. Transferring money with Bitcoin is very fast and you absolutely do not need any third-party association.
On the other hand, when dealing with fiat currency exchange, a mobile wallet is used. You may exchange an amount of E-Money being transferred for the same E-Value amount. Both fiat and cryptocurrencies allow you to buy anything you desire. But the processes involved are absolutely different from each other.
Depending on the things you buy, you will find that one form of currency is better than the other. This is absolutely your choice.
Is Bitcoin, a cryptocurrency, better than fiat currency?
The long-term benefits and power of bitcoins are yet to be established. But it has been predicted by the cryptocurrency gurus and experts to go a long way, specifically revolutionizing the way online transactions are conducted. In the current market, Bitcoin is mainly included in online casinos and gambling, but not limited to them.
In addition, if you compare the fiat currencies, Bitcoin allows you to take the power and authority of the banks and the government as it is not controlled. Crypto based currency has the ability to create or invent free market capital. Fiat currencies, unlike crypto-based currencies, are affected by inflation and changes in the market. Such aspects lead individuals to believe that crypto-based currencies will soon take over mainstream currencies and change the way money is used.
Why are bitcoins 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 the individuals and not with the banks as with fiat currencies.
- Bitcoin is not affected by inflation . But fiat currency will be easier to lose and will be affected.
- Bitcoin currency is easier to exchange and transfer compared to fiat or government currencies.
- The transaction fees associated with Bitcoin are much cheaper and easily affordable.
Cryptocurrencies seem to be a cheap option among people
The fiat type currencies are the centralized and legal way of exchanging money. But cryptocurrencies have gained immense popularity in recent years. There will never be anyone acting as a middleman like the banks do. Additionally, the cryptos are much cheaper and less expensive than the traditional fiat currencies.
Send money anywhere directly without waiting for bank approval
You can send money directly to anyone in the world and it’s super fast. The money will be deleted within a few minutes. sell dogecoin in nigeria You don’t have to wait through the traditional clearing and verification processes of banking systems, which can take up to several days, to get approval. As it is decentralized and not covered by government laws and regulations, nobody has the power to do anything with your account.
Blockchain technology plays a very important role in this
Thanks to cryptocurrencies, this gives us the power and authority to become our own bank and take control of our finances. This is due to the blockchain technology which offers a higher level of sophistication when handling the finances. In fact, there are some mainstream financial industries that have started to incorporate the idea of technology.