The age of technology has paved the way for many innovations in all facets of society. The effects of these technological advancements couldn’t be more apparent than the breakthrough of cryptocurrency and its merits not just in finance but also in other industries.
However, despite all the benefits of cryptocurrencies like being a decentralised platform where investors won’t have to worry about a central authority, the majority still won’t delve into its system and start investing in crypto coins.
It’s even more so when fiat currency is still the most used and reliable currency. Be that as it may, cryptocurrency is edging closer and closer as new investors gain interest in it, giving fiat currency a run for its money.
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Fiat vs crypto: What are the differences?
Currencies are complex financial systems that generally provide each country with a medium of exchange for goods and services. Simply put, it’s money in circulation that comes in physical or digital form.
Different currencies such as fiat money and cryptocurrency allow a system to exist where people can live in harmony and make everyday transactions. Read how these two currencies differ from each other in the coming sections.
What is fiat currency?
Fiat currency is the medium of exchange used in almost all parts of the world with a centralised government. Fiat money, also known as legal tender, comes in paper and coins that are used to make day-to-day transactions. They are monitored and controlled by a central bank that has the authority to raise the money supply in the economic circulation.
This means that central banks like the Federal Reserve in the United States can control how much money should be printed and made, which in turn controls the interest rates attached to the principal amount borrowed by other banks.
Of course, the interest rates will be the main driver of government income since the percentage of a principal amount borrowed would go to the government’s books.
What is cryptocurrency?
Cryptocurrency runs through the use of blockchain technology which is decentralised in nature. This means that there is no central authority that manages the digital asset. Moreover, unlike fiat money, cryptocurrency allows for more efficient and timely transactions between buyers and sellers.
Because of the decentralised quality of cryptocurrencies, investors are opting to delve into digital assets rather than fiat money because they are completely in control of their investments in the market.
An in-depth look at decentralisation
Decentralisation is all possible due to the blockchain technology used in all cryptocurrencies like Bitcoin, Ethereum and Dogecoin. A blockchain lets users process transactions through a public ledger where processing transactions are completed seamlessly no matter where you are in the world.
The digital ledger will then store information from transactions called ‘hash’ and link them to past blocks. This process continues until another block is added to the blockchain. These strings of information stored in the blockchain are accessible through the crypto network.
While you may think that this process may be too unsafe to use because a central authority is not present to protect it, that is quite far from the truth. When information is stored inside a blockchain technology, data is encrypted to ensure that information will not be removed, altered or stolen.
A brief history of cryptocurrency
Cryptocurrency owes its existence to Satoshi Nakomoto after he outlined the first whitepaper that would soon give birth to Bitcoin, the highest-valued cryptocurrency in the market right now.
In 2009, Nakamoto launched Bitcoin to the general public and a lot of people are enthusiastic about the potential it brought which gave rise to crypto traders and miners. After a few years, Bitcoin gained the early bird rights to being not just the first cryptocurrency but also the top one with the current price of $64,650.26.
Regarded as the best cryptocurrency in the market, Bitcoin is the foundation of almost all cryptocurrencies that came after it which are called altcoins. Some of the top altcoins in the market today are Ethereum and Dogecoin.
Which currency is the best?
To better understand which currency is best moving forward, you should first look at this table below to help you visualise the stark differences between fiat and crypto:
| Fiat | Crypto |
| It has a centralised system where the central bank is the head of authority over all operations concerning the printing of money and interest rates. | It has a decentralised blockchain technology where no authoritative figure manages every operation that goes into the cryptocurrency. |
| Information is private to banks in a centralised software. | Information is stored on a digital public ledger accessible by everyone. |
| Banks manage your funds. | You have full control over your funds. |
| Registrants must have credentials and documentation to be able to use different financial services. | Data is encrypted and investors operate under a pseudonym. |
| Fees like interest rates and safety deposits for savings and other accounts can stack up. | It has minimal transaction fees. |
| Slow transaction process that takes multiple business days to finish. | Faster transaction process that takes minutes to finish. |
In terms of convenience, privacy and control, cryptocurrency is the clear winner against fiat money. However, when the market crashes in the crypto industry, it’s hard to recover funds since the industry is so volatile and many factors can affect the prices of your crypto coins and tokens.
With that said, fiat money has the security side of things figured out and in the event of a financial setback like the 2008 global financial crisis, governments can apply their economic policies to alleviate the errors of the market.
However, it seems like cryptocurrency is on the move to mainstream adoption. This is because it’s simply a faster and more efficient means of completing transactions that people are starting to take notice of.
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