The Difference Between Cryptocurrency And Fiat Currency
Cryptocurrency and fiat currency have two essential i.e. they enable financial transactions between two parties and act as a store or deposit of value. The trust in the fiat currency comes from the money supply issued by a central authority while with cryptocurrency it is the underlying technology – blockchain technology.
When a consumer buys a product with fiat currency like the Euro , it is vouched by the European Central Bank (ECB) or governmental institution which acts as a intermediary that vouches for the currency’s worth. The currency will be able to deliver its values and this trust is shown by both the buyer and the seller.
Fiat Currency And Cryptocurrency
Any commodity money like gold or car or a bicycle gets its value from its own worth. Fiat money is guaranteed by the Central Government which declares it as a legal tender.
Cryptocurrency are digital assets and they are involved in transactions between two parties but they allow direct transactions between the parties and the need for an intermediately like a Bank is negated. While the Fiat currency can be printed any time and could precipitate inflation, the number of cryto tokens are fixed and do not vary at a particular time. For example the Bitcoin has a fixed supply of 21.000.000 units, making it even scarcer than gold.
Therefore answering the question-Is Fiat Currency and Cryptocurrency the same is difficult. Cryptocurrency is decentralized and can be traded anywhere across the globe at anytime without the need for any bank or a government and this is the most ground-breaking feature of cryptocurrencies.
Fiat money is a debt and when the Central Bank issues a currency to the consumer it is actually issuing a percentage of the government’s debt. Therefore fiat money has an accredited value since the government is declaring it a legal tender but does not have any intrinsic value.
While fiat currency gets a major part of its value from debt, with cryptocurrency this is completely different. Cryptocurrency like Bitcoin has intrinsic value beyond the trust of its community and is not dependent on any system of debts. Rather it all boils down to the fact that how effective it is as a medium of exchange.
Cryptocurrency can be bought and sold by anyone from any location on the globe transcending borders and boundaries. Bitcoin was born to become the new form of trust for our future global monetary system. The system is very transparent and relies on maths and the actual consensus of the everyday user. Keeping all this in mind, which is a better option for our future? Bitcoin or fiat?