What is the difference between Cryptocurrency and Fiat ? This is a question you have probably heard over and over again. It has led to so many debates on social media and forums. With so much conflicting information out there, how do you know what is correct and what isn’t ? This piece will help you understand the key differences between cryptocurrencies and fiat.
Cryptocurrencies Vs. Fiat : Similarities and Differences
To begin, it’s important to note that they are both currencies, but one has the backing of the government while the other doesn’t. Fiat is a legal tender that is backed by a central government. As it is popularly called, Fiat money is a medium of exchange plagued with government regulations and centralized control.
It does not have any intrinsic value and it is only important because the government says it’s important. This is because the value is maintained by the government and their efficiency in running the economy. Fiat is not backed by any commodity and it is slowly losing its appeal to cryptocurrencies.
Cryptocurrency is a digital medium of exchange and store of value. It is not a legal tender and it is not backed by the central government. The key differences between cryptocurrencies and fiat will be analyzed based on control, corruption, centralization, accessibility, and limits.
Control of Fiat and Cryptocurrencies
There is little to no individual control when using Fiat because the government is in charge and can easily freeze or even close your account for one reason or the other. The owners of cryptocurrencies need not worry about this since they have control of their wallet and their funds at all times. This makes Cryptocurrency more secure and flexible. After all, the government can’t seize your digital wallet.
Corruption With Fiat and Cryptocurrencies
With Cryptocurrency, there is no corruption because it runs on transparency and the ledgers are made public so they can’t be manipulated under any circumstance. With Fiat money, the ledgers are not public and can easily be manipulated by the centralized institutions.
Centralization of Fiat/Decentralization of Cryptocurrencies
The government has full control of Fiat and this leads to centralization. It’s important to note that when an institution has full control over any currency, it could lead to mismanagement of funds thus resulting in inflation. The reverse is the case with cryptocurrencies because it is completely decentralized. It is an easy and efficient way to transfer money over the internet.
Accessibility in Cryptocurrency Vs Fiat
Cryptocurrency is accessible to everyone interested. It is not elitist and as long as you can have access to a computer to buy and hold your tokens in a virtual wallet, you are good to go. With Fiat, only individuals who are accepted in the commercial banking system are allowed to hold Fiat-dominated accounts. Thus making Fiat elitist and picky in who can participate or have access to this currency.
There are sets of mandatory requirements you must meet to be able to have a Fiat money account but all you need for a cryptocurrency wallet is an email and username. This explains why there are still several millions of unbanked people in the world.
Limits With Fiat Vs. Cryptocurrencies
Fiat money doesn’t have a limit. Since it has the backing of the government, an unlimited amount can be printed at any time. While this isn’t always the case, most cryptocurrencies have a maximum supply cap. For example, only 21 million Bitcoins can ever be in existence.
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