In the crypto universe most of the users / beginners are unaware of the common terms and expressions used by the experts .It is not easy to understand what a cryptocurrency is. It is important to understand the relationship between cryptocurrencies and traditional currencies and the technology involved and the real use that solves complex problems.
In this blog i have tried my best to explain the characteristics, concept , advantages and the disadvantages of crypto and fiat. Many including me believe that blockchain and crypto is the future and it will have a significant impact on the global economic scenario.
Cryptocurrency
Cryptocurrency or crypto asset represents the financial technology created in 2009. Bitcoin is known as the digital gold, some call it even King of crypto. There are other specimens with different fundamentals like Ethereum, Litecoin ,Ripple etc which come under the term altcoin. There are some altcoins older than bitcoin but less known ans used . All these crypto currencies are based on Peer to Peer network( P2P) where there is no need for a middle man or third party i.e Bank or Government.
Fiat Money
Fiat is the term given to all paper money and coins that are issued by the government and banks worldwide. The value of fiat money depends on the internal and external factors of the economy ans also inflation, policies and multinational company policies.Fiat money is not backed by any physical commodity such as gold and silver .Fiat money has no intrinsic value. The paper of a dollar bill is virtually worthless. The market supply and demand determine its worth. The value of fiat money comes from government.
Differences and Characteristics
The main difference is fiat money has central issuing authority whereas in crypto world there is no control of any authority.
Fiat money has unlimited supply , Banks have the capacity to issue and print fiat money and manipulate their value related to other currencies . Cryptocurrencies on the other hand have limited supply. Cryptocurency currency provision is controlled by an algorithm i.e a limit to issue these currencies. For example Bitcoin is expected to reach a maximum of 21 million in supply. The increase in demand of cryptocurrencies with the same level of supply makes it an interesting asset.
Decentralization
Cryptocurrencies are decentralized. This is another strong feature that differentiates crypto from fiat. This indicates that no government or institution can control crypto assets.
The only people who keep the system up and running are the programmers on an open network scattered around the world.
Cryptocurrencies has an encryption technology that prevents assets from being reused and copied. Fiat money can be copied and falsified easily.
Dependability
The transactions made with fiat money can be easily reversed whereas crypto currency transaction reversals are not that easy.This happens because there is no responsible body like bank . This can be observed as a negative perspective by some users but this immutability offers many security to users as it ensures transactions cannot be tampered.
Anonymity
Transactions made with fiat are identifiable and can be tracked. With crypto the situation is different. Since there is no bank,users are not required to identify themselves. In crypto identification occurs only by the wallet address.
Since crypto is getting popular some countries legislation requite the exchanges to perform Identity checks of their customers before allowing them access to trade. This makes it easier to track the user and their activities.
Both have their own pros and cons. Fiat as of now is used for daily transactions by common man to purchase goods, shopping at supermarket, paying college tuition etc but in terms of appreciation digital assets may be more advantageous than fiat money. Crypto assets still have more restricted use for people from performing daily simple transactions like with fiat money.
Crypto assets have lower costs for transactions compared to fiat which is a major advantage.
As of today in 2020 fiat money is used worldwide for daily transactions as it is simpler and a traditional one. However i believe this scenario may change in the near future. The high value cryptocurrency and its prominence is getting popular. The decentralization ans anonymity features of crypto has les people turn their attention to this alternative.
*So do your research and this is the optimal time to aquire crypto coins .
Dont miss this opportunity.*