1. Are you aware of the fiat currencies and the crypto currencies? They
both are currencies in one form or the other and are open for public
use across the world. But they are both different and distinct in their
own ways. There is always one group that favors the use of cryptos,
while the other has a soft corner for the fiat currencies.
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In cashless society- crypto money play a huge role
If you have a look at the market of the 1970s and 1980s, you will find
that the cash played the dominant role. But, with the change in the
technology, electronic transactions have become the usual norm.
Today, more and more people are influenced in becoming the cashless
society. With the progress towards the cashless society,
cryptocurrencies have a big role to play.
Crypto currency and fiat currency are always at loggerheads
Cryptocurrency and fiat currency are popular types of digital currency,
especially when it is about an online transaction. They both are
currencies currently in use in the market but have some differences in
them. There is a hell lot of hypes that you will hear on a daily basis
comparing the crypto money and the fiat money. This article will
2. highlight the difference between the two in a more comprehensive and
clear manner.
Differentiating in what the currencies stand for
Before going for the difference between the two, you must understand
what do they stand for and how are they are defined.
The fiat currency is a legal tender that has the support of the central
government, and it operates in the physical form. For instance, US
dollars, British Pounds, Euro etc. On the other hand, the crypto
currency is a non-legal tender, and doesn't have any backup from the
central government or bank.
Hence, the difference between crypto currency and fiat currency is
noted as follows:
• Crypto-currencies are decentralized and global in nature. There are
no one entity or government that controls the currency with their laws
and regulations. The Fiat currency is centralized, under the control of
the laws and regulations of the banks and government.
• Crypto-currencies have their existence only in the digital domain. On
the other hand, you will find that the fiat currencies have a tangible
and physical existence.
• There is a limited supply of crypto-currencies with a maximum set of
them getting supplied in the market. Whereas, the fiat money has an
3. unlimited supply as the government and bank are entitled to produce
coins and paper money whenever the situation is required.
• The Bitcoin and other crypto type currencies are created by the
computers, while the fiat currencies are issued by the local government
and the banks.
• Cryptocurrencies are presented as the public and private code pieces.
On the other hand, the fiat currencies are presented in the form of
coins and paper money.
• The value of the crypto currencies is not recognized by the supply and
demand of the market. Whereas, the fiat currency value is determined
by the market regulations of supply and demand.
The different types of crypto and fiat currencies
In the last one decade, the popularity of crypto type currencies has
emerged as a huge success. It was in 2009, when Bitcoin was first
introduced, and years after several other types of crypto currencies
have emerged. Starting from Litecoin. Dogecoin, Ripple to the Dcash
and Zcash, there is a plethora of them. On the other hand, the fiat
currency has a rich and ancient roots, with the Great British Pound,
that dates back to 775 AD. It is considered as the oldest currency in the
world that is still in use.
The differences in the anonymity between the two currencies
When you are using the fiat currencies, you need to undergo a user
identification or verification process. You are asked to upload a recent
picture of yourself and some of the required documents to be issued as
per the public authorities. You don't need to undergo any of the
4. required processes with the crypto currencies. Though your personal
information and confidential details don't get public, but all your
transactions are recorded and tracked in both the fiat and the crypto
currencies.
Fiat currency vs crypto currency: transparency level
• The transparency level with the crypto type currencies are considered
to be more. This is because the revenue streams are displayed in a
public chain. Everyone can witness their own and others' transactions.
• The fiat or govt. currencies are not transparent, as there are not
public chains to see the revenue streams of the people.
A comparative historical roots
If you compare the crypto money with that of its counterpart, fiat or
government currency, you will find that their existence and creation
brings the difference. The Fiat or government currency, dates back 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 the people
all over.
On the other hand, the crypto coin was perhaps first introduced only a
decade ago, with the introduction of Bitcoin in 2009. The challenge
that the Bitcoin and other crypto currencies face is catching up with
5. the immense popularity and increasing fan base of the fiat currency.
Crypto currency, is no doubt gaining importance and popularity in the
economic market, but it has still not been accepted widely in the
society as the fiat currency.
A comparative history of the two currencies:
• It was in the 11th century, when the Chinese Song dynasty was
perhaps the first one to issue the paper money. It was not allowed to
exchange with valuables like gold and silver or silk.
• There were Tally sticks that were introduced as a fiat or government
currency. 1100 Tally sticks were introduced as a combat for the
shortages in gold.
• 1971, was the year, when the fiat currency received a worldwide
recognition. President Nixon introduced it in order to eliminate the
dollar pegging system to gold.
• It was in 1998, when the idea of an anonymous electronic cash
system emerged by Wei Dai. Bitgold-the very first crypto currency was
created by Nick Szabo, but it didn't receive as much attention as
Bitcoin.
• In 2009, Bitcoin was introduced in the market, that became the first
crypto currency that was accepted across the globe. In 2011 and after,
a series of several other crypto currencies were introduced. Some of
the popular ones include, Litecoin, Dogecoin, Ethereum, Ripple, Zcash,
Dash and so on.
The traits of both the currencies
6. The potential of the crypto type currencies and fiat currencies,
accessing their traits is important. You will find that in some of the
criteria, Bitcoin and other crypto currency is superior than the fiat or
government currency, and in some cases, the latter surpasses. 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 us compare their traits with respect to certain factors.
• Both the crypto coins and fiat type currencies are interchangeable in
nature.
• As per the portability is concerned both the currencies secure more
or less the same position.
• With respect to the non consumable criteria, crypto currency and fiat
type currency have the equal status.
• Crypto type currencies have high durability as compared to the fiat-
currencies that have moderate level of durability.
• Both the crypto or virtual currencies and the fiat or government
currencies ensure secure and safeguarded transactions and exchange.
• Crypto or digital currencies are highly divisible in nature. On the other
hand, the fiat type currencies are moderately divisible.
• In terms of the transaction process, the crypto currencies are easy
and hassle free. Whereas, on the other hand, the traction process
associated with the fiat currencies are easy, but not like the cryptos.
7. • The crypto based currencies are decentralized and global in nature,
unlike the fiat currencies that are centralized and functions under the
laws and regulations of the government.
• The crypto based currencies have high scarcity, where as, the fiat
currencies are unlimited as the government can issue coins and paper
money whenever there is a need.
• The crypto based currencies are based on mathematical algorithms,
and are programmable. The fiat currencies are not at all
programmable.
• The fiat currencies are sovereign in nature, while the crypto
currencies are not.
The process of the functioning of the currencies
You can find the significant differences between the crypto or digital
currencies and the fiat currencies with the way they both operate and
the transaction process that take place. They are contrasting in nature.
The transfer of money using the Bitcoin is very quick, and you
absolutely don't need any third party association.
On the other hand, if you are involved with the money exchange using
Fiat type currency, a mobile wallet is in use. You can exchange an
amount of e-money that gets transferred into the equal e-value
amount. Both the fiat and the crypto currencies enable you to purchase
everything that you desire. But the processes involved are absolutely
distinct from each other.
Depending on the things you purchase, you will find that one currency
form is better than the other. This is absolutely your choice.
8. Is Bitcoin, a crypto currency better than the fiat-currency?
The long term benefits and the capability of the Bitcoins is still not
established. But it has been predicted by the crypto currency gurus and
experts, that they will go a long way, especially revolutionizing the way
the online transactions are done. In the current market, the Bitcoin is
mainly included in the online casinos and the gambling, but it is not
limited to it.
Furthermore, when you compare the fiat currencies, the Bitcoin allows
you to seize the power and authority from the banks and the
government since it is not controlled. The cryptography based currency
has the capability to create or come up with the free market capitals.
Fiat currencies are affected by the inflation and the changes in the
market, unlike the crypto based currencies. Such aspects make
individuals believe that cryptograph based currencies will soon take
over the mainstream currencies and bring a transformation in the way
the money is used.
Why is Bitcoins considered to be a better aspect than the fiat type
currencies?
• Bitcoin gives you the opportunity to re-create a free market
capitalism.
• The power of controlling the money is absolutely with the individuals,
and not with the banks like the fiat type currencies.
• When there is an inflation, the Bitcoin is not affected. But the Fiat
type currency will be easier to lose and get affected by it.
9. • The Bitcoin currency is easy easier to exchange and transfer as
compared to the fiat or government currencies.
• The transaction fees involved with the Bitcoin are way cheaper and
easily affordable.
Crypto currencies seem to be a favorable option among the people
The fiat type currencies are the centralized and legal way of
exchanging money. But, the crypto currencies have acquired immense
popularity in the past few years. There will never be anyone who would
act as a middle man, like the case with the banks. Moreover, the
cryptos are way cheaper and less expensive that the conventional fiat
currencies.
Send money anywhere directly without waiting for the bank's approval
You can send money to anyone in the world directly, and it is super
fast. The money gets cleared within a few minutes time. You don't have
to wait for the traditional clearing and verification processes of the
banking systems, which might take up to several days to get a
clearance. Since it is decentralized and doesn't come under the law and
regulations of the government, nobody has any power to do anything
with your account.
The blockchain technology has a very big role to play
Thanks to the crypto currencies, that gives us the power and the
authority to become our very own bank, and take control over our
finances. It is because of the blockchain technology that offers a higher
level of sophistication while dealing with the finances. In fact, there are
10. some mainstream financial industries that have started incorporating
the idea of the technology.
As far is crypto market is concerned, volatility comes hand in hand, but
so do its most important property i.e. Decentralization. Crypto market
is decentralized, what this means is that the price fall in one crypto
does not necessarily means down trend of any other crypto. Thus
giving us an opportunity in the form of what are called mutual funds.
It's a Concept of managing a portfolio of the crypto currencies that you
invest in. The Idea is to spread your investments to multiple
Cryptocurrencies so as to reduce the risk involved if any crypto starts
on a bear run
Similar to this concept is the concept of Indices in crypto market.
Indices provide a standard point of reference for the market as a
whole. The Idea is to choose the top currencies in the market and
distribute the investment among them. These chosen crypto currencies
change if the index are dynamic in nature and only consider the top
currencies. For example if a currency 'X' drops down to 11th position in
crypto market, the index considering top 10 currencies would now
won't consider currency 'X', rather start considering currency 'Y' which
have taken it's place. Some providers such as cci30 and crypto20 have
tokenized these Crypto indices. While this might look like a good Idea
to some, others oppose due to the fact that there are some pre-
requisites to invest in these tokens such as a minimum amount of
investment is needed. While others such as cryptoz provide the
methodology and a the index value, along with the currency
11. constituents so that an investor is free to invest the amount he/she
wants to and choose not to invest in a crypto otherwise included in an
index. Thus, indices give you a choice to further smooth out the
volatility and reduce the risk involved.
If you are going to put money in cryptocurrency for the first time, we
suggest that you get at least a basic understanding of the industry. In
this article, we are going to give you 5 tips and tricks that will help you
become a better investor. Keeping these tips in mind, it will be easier
for you to achieve success as a beginner.
1. Look for Reputable Sources of News
If you are sure that you can benefit from Crypto, you should stay tuned
to trustworthy sources and don't listen to non-believers. For achieving
success as an investor, you should consider some facts and then keep
investing your money wisely.
12. 2. Get Ready for Volatility
Unlike regular currencies, cryptocurrency is not that stable. A few
months back, the value of one of the most popular cryptocurrencies
called Bitcoin was around $40000. But it has now dropped back to
$30000. So, what you need to do is make your decision wisely. If you
become greedy, you may suffer huge losses.
Even if you ask expert crypto traders, they will say that even they don't
have the mastery of the art. So, you need to be careful when it comes
to you investing in crypto as cryptocurrencies are quite volatile.
3. Consider other Altcoins
13. As far as cryptocurrency is concerned, you are not just restricted to
Bitcoins. Therefore, it is not a good idea to put all your eggs in one
basket. In other words, you should invest your money in other types of
cryptocurrency as well.
So, what you need to do is do your homework and find out which ones
are doing well. In other words, you should choose the top 5
cryptocurrencies and invest your money in them.
4. Learn about Hot and Cold Wallets
Although crypto is a digital currency, you can still store them on the
internet in your hot wallets. But if you are just starting out, you may
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14. want to give a go to offline wallets as they are quite useful and
versatile.
On the other hand, it is true that cold wallets offer protection against
hackers. So, if you want to diversify your assets, we suggest that you
get familiar with both hot wallets and cold wallets.
5. Be Vigilant
Although cryptocurrencies have high safety standards than
conventional currency, we suggest that you follow precautions. So,
what you need to do is be careful when it comes to investing a large
amount of money in the digital currency of this type.
You should find about different methods to handle your transactions
and see how you can effectively manage your cryptocurrency in a
responsible manner.