Cryptocurrencies vs fiat currencies
Are you aware of fiat currencies and cryptocurrencies? Both are currencies in one form or another and are open to public use all over the world. But they are both different and distinct in their own way. There is always one group that prefers to use cryptocurrencies, while the other group has a soft corner for fiat currencies.
In a cashless society – crypto money plays a big role
If you take a look at the market in the seventies and eighties, you will find that money played the dominant role. But with the change in technology, electronic transactions have become the norm. Today, more and more people are affected to become a cashless society. With the progress towards a cashless society, crypto currencies are playing a huge role.
Cryptocurrency and fiat currency are always at odds
Cryptocurrencies and fiat currencies are popular types of digital currencies, especially when it comes to online transactions. Both are currencies currently used in the market but there are some differences between them. There is a hell of a lot that you will hear on a daily basis comparing cryptocurrency to fiat money. This article will highlight the difference between the two in a more comprehensive and clear manner.
Differentiate what currencies represent
Before looking for the difference between the two, you should understand what they represent and how they are defined.
Fiat currency is a legal tender that has the support of the central government, and operates in physical form. For example, US dollar, British pound, Euro etc. On the other hand, cryptocurrency is illegal tender, and does not have any backup from the central government or the bank.
Hence, he notes the difference between cryptocurrency and fiat currency 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. A centralized fiat currency, under the control of bank and government laws and regulations.
• Cryptocurrencies exist only in the digital sphere. On the other hand, you will find that fiat currencies have a tangible and physical presence.
• There is a limited supply of cryptocurrencies with the maximum range available in the market. Whereas, paper money has an unlimited supply as the government and the bank have the right to produce coins and paper money whenever the situation is required.
• Bitcoin and other cryptocurrencies are generated by computers, while fiat currencies are issued by local government and banks.
• Cryptocurrencies are offered as public and private ciphers. On the other hand, paper currency is presented in the form of coins and paper money.
• The value of cryptocurrencies is not determined by supply and demand in the market. The value of fiat currency is determined by market regulations of supply and demand.
Different types of cryptocurrencies and fiat currencies
In the past decade, the popularity of cryptocurrencies has emerged as a huge success. That was in 2009, when Bitcoin was first introduced, and years later several other types of cryptocurrency appeared. Starting with Litecoin. Dogecoin, Ripple to Dcash and Zcash, there are quite a few of them. On the other hand, paper currency has rich and ancient roots, with the British pound dating back to 775 AD. It is considered the oldest coin in the world still in use.
Differences in anonymity between the two currencies
When you use fiat currencies, you need to undergo a user identification or verification process. You are requested to upload a recent photo of yourself and some documents required to be issued as per the public authorities. You do not need to undergo any of the required processes with cryptocurrencies. Although your personal information and confidential details are not made public, all your transactions are recorded and tracked in both fiat and cryptocurrencies.
Fiat Currency vs. Cryptocurrency: The Level of Transparency
• The level of transparency with cryptocurrencies is more. This is because revenue streams are presented in a generic series. Everyone can witness their own transactions and those of others.
• Fiat or Govt. Coins are not transparent, as there are no public chains to know people’s revenue streams.