Crypto Currency vs. Fiat Currency
Are you aware of fiat currency and crypto currency? Both of them are currencies in one form or another and are open for public use all over the world. But they both are different and distinct in their own way. There is always one group that favors the use of crypto, while the other group has a soft corner for fiat currencies.
In cashless society- crypto money plays a huge role
If you look at the markets of 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 becoming a cashless society. With the move towards a cashless society, cryptocurrencies have a big role to play
Cryptocurrencies and fiat currencies are always at the loggerhead
Cryptocurrencies and fiat currencies are popular types of digital currencies, especially when it comes to an online transaction. They are both currently used currencies in the market but there are some differences between them. You will hear a lot of hype on a daily basis comparing crypto money and fiat money. This article is more comprehensive and will clearly highlight the difference between the two.
What difference does the currency 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 legal tender backed by a central government and operates in physical form. For example, US Dollar, British Pound, Euro etc. Cryptocurrencies, on the other hand, are non-legal tender, and have no backup from central governments or banks.
So, the difference between crypto currency and fiat currency is mentioned as follows:
• Crypto-currencies are decentralized and global in nature. There is no entity or government that controls the currency with their laws and regulations. Fiat currencies are centralized under the control of banks and government laws and regulations.
• Crypto-currencies exist only in the digital domain. On the other hand, you will find that fiat currencies have a real and physical existence.
• There is a limited supply of crypto-currencies with a maximum set being supplied to the market. Whereas, there is an unlimited supply of fiat money because governments and banks are entitled to produce coins and paper money whenever the situation calls for it.
• Bitcoin and other crypto-type currencies are created by computers, while fiat currencies are issued by local governments and banks.
• Cryptocurrencies are represented as public and private code fragments. On the other hand, fiat currencies are presented in the form of coins and paper money.
• Crypto currency value is not recognized by market supply and demand. Whereas, the value of fiat currency is determined by the market rules of supply and demand.
Different types of crypto and fiat currencies
Over the past decade, the popularity of crypto-type currencies has emerged as a huge success. It was in 2009, when Bitcoin was first launched, and a few years later other types of crypto currencies emerged. Starting with Litecoin. Dogecoin, Ripple to the Dcash and Zcash, there are more On the other hand, fiat currency has rich and ancient roots, with the Great British Pound, which dates back to 775 AD. It is considered to be the world’s oldest currency still in use.
Anonymous differences between two currencies
When you are using fiat currency, you must go through a user identification or verification process. You are asked to upload a recent photograph of yourself and some necessary documents issued by the government authorities. You don’t have to go through any process required with crypto currency. Although your personal information and confidential details are not public, all your transactions are recorded and tracked in both fiat and crypto currencies.
Fiat Currencies vs. Crypto Currencies: Levels of Transparency
• The level of transparency is considered to be higher with crypto type currencies. This is because revenue streams appear on a public chain Everyone can witness their own and others’ transactions.
• Fiat or Govt. Currencies are not transparent, as there is no public chain to see the flow of people’s revenue.
A comparative historical root
If you compare crypto money with its counterpart, fiat or official currency, you will see that their existence and creation makes a difference. Fiat, or official currency, began its existence as early as 775 AD with the introduction of the Great British Pound. This is why fiat type currency is easily accepted by people everywhere.
On the other hand, crypto coins were probably first introduced just over a decade ago with the introduction of Bitcoin in 2009. The challenge that Bitcoin and other cryptocurrencies face is the massive popularity and growing fan base of fiat currencies. . Cryptocurrency, no doubt, is gaining importance and popularity in the economic market, but it is still not widely accepted in the society as fiat currency.
Comparative history of the two currencies:
• It was in the 11th century, when the Chinese Song dynasty was probably the first to issue paper money. Bartering with valuables such as gold and silver or silk was not allowed.
• There were tally sticks that were introduced as fiat or official currency. 1100 tally sticks were introduced as a war for gold shortage.
• 1971, the year, when fiat currency gained worldwide recognition. President Nixon introduced it to eliminate the dollar pegging system to gold.
• It was in 1998, when the concept of an anonymous electronic cash system was conceived by Wei Dai. BitGold—The first cryptocurrency was created by Nick Szabo, but it didn’t get as much attention as Bitcoin.
• In 2009, Bitcoin was launched in the market, it was the first crypto currency to be accepted around the world. In and after 2011, a series of other crypto currencies were launched. Some of the popular ones include Litecoin, Dogecoin, Ethereum, Ripple, Zcash, Dash etc.
Features of both currencies
It is important to access the potential of crypto type currencies and fiat currencies, their features. You will find that on some criteria, Bitcoin and other crypto currencies are superior to fiat or official currencies, and in some cases, surpass the latter. It is absolutely your call to choose the type of currency (crypto type currency or fiat type currency) based on your personal needs and requirements.
Let’s compare their features with respect to some factors.
• Both crypto coins and fiat currencies are fungible in nature.
• Both currencies secure more or less the same position in terms of portability.
• In terms of immutable criteria, crypto currencies and fiat type currencies have equal status
• Crypto type currencies have high stability compared to fiat-currencies with medium level of stability.
• Both crypto or virtual currency and fiat or official currency ensure safe and secure transactions and exchanges.
• Crypto or digital currency is highly divisible in nature. On the other hand, fiat currencies are moderately divisible.
• In terms of transaction process, crypto currencies are simple and hassle free. On the other hand, the traction process associated with fiat currencies is simple, but not like that of cryptos.
• Crypto based currencies are decentralized and global in nature, unlike fiat currencies which are centralized and operate under government laws and regulations.
• Crypto based currencies have high scarcity, whereas fiat currencies are unlimited as governments can issue coins and paper money whenever needed.
• Crypto based currencies are based on mathematical algorithms and are programmable. Fiat currencies are not programmable at all.
• Fiat currencies are sovereign in nature, while crypto currencies are not
Functionality of the currency
You can find significant differences between crypto or digital currency and fiat currency in the way they both work and the transaction process takes place. They are contrary to nature. Transferring money using Bitcoin is very fast, and you need absolutely no third party agency.
On the other hand, if you are involved in money exchange using fiat type currency, then a mobile wallet is being used. You can exchange an amount of e-money which is transferred to an amount of equal e-value. Both fiat and crypto currencies enable you to buy anything you want. But the processes involved are quite different from each other.
Depending on the things you buy, you may find that one form of currency is better than another. It is absolutely your choice.
Is Bitcoin, a crypto-currency better than a fiat-currency?
Bitcoin’s long-term benefits and potential are yet to be established. But as predicted by cryptocurrency gurus and experts, they will go far, especially revolutionizing the way online transactions are done. In the current market, Bitcoin mainly includes, but is not limited to, online casinos and gambling.
Additionally, when you compare fiat currencies, Bitcoin allows you to take away power and authority from banks and governments because it is not regulated. Cryptography based currencies have the ability to create or generate free market capital. Fiat currencies are affected by inflation and market fluctuations, unlike crypto-based currencies. Such aspects lead people to believe that cryptographic based currencies will soon overtake mainstream currencies and bring about a transformation in the way money is used.
Why is Bitcoin considered better than fiat currency?
• Bitcoin allows you to recreate a free market capitalism.
• The power to control money rests entirely with individuals, and not with banks as with fiat type currencies.
• When there is an inflation, Bitcoin is not affected. But fiat type currencies will be easy to lose and be influenced by.
• Bitcoin currency is easier to exchange and transfer than fiat or government currency.
• The transaction fees involved with Bitcoin are very cheap and easily affordable.
Crypto currency seems to be a favorable option among people
Fiat type currencies are centralized and legal means of money exchange. But, crypto currencies have gained huge popularity in the last few years. There will be no one to act as a middle man as in the case of banks. Moreover, cryptos are much cheaper and less expensive than conventional 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. Money clears within minutes. You don’t have to wait for the banking system’s traditional clearing and verification processes, which can take up to days to get clearance. Since it is decentralized and does not come under government laws and regulations, no one has the power to do anything with your account.
Blockchain technology has a very big role to play
Thanks to crypto currencies, which give us the power and authority to be our own banks and take control over our money. This is due to blockchain technology that provides a high level of sophistication when dealing with money. In fact, there are some mainstream financial industries that are beginning to incorporate the concept of technology.