Cryptocurrency is a digital currency that uses cryptography and is difficult to counterfeit due to its security feature. It is a scarce asset. Crypto currency can also be used for the purchase of goods and services or can be traded for profit but uses an online ledger to secure online transactions. Anyone can acquire a digital currency of choice and can make online transfer at the click of a button. In future, it will be easier to transact and own cryptos. Fiat as a currency has remained a legal tender in most countries of the world. When a crypto currency is created, it is issued by a single issuer, its is centralized.
Bitcoin as a crypto currency was founded by a Japanese named Satoshi Nakamoto, he also devised the first blockchain database and also deployed the first decentralized digital currency. Other currencies apart for it is called “Alt Coins.” These are more than 6,700 crypto currencies according to Coinmarketcap.com (a market research company). And the total market value is worth more than 1.6 trillion. It’s transactions are irreversible and makes tracking difficult.
These are the some of the crypto currencies:
Bitcoin (BTC)
Etherum (ETH)
Tether (TT)
Lite coin (LTC)
Bitcoin cash (BCH)
Stellar (XLM)
Ripple (XRP)
Binance coin (BNB)
Features of crypto currency include: Blockchain technology, cryptography, and block mining. Bitcoin has no storage cost in the transfer of money and had a limited supply. Crypto currency might go up in value but investors see it as a speculation. In crypto currency, for you to profit someone has to pay more for the currency than you did because crypto currency doesn’t generate cash flow. For crypto currency to be seen as the future currency, it needs stability so that merchant and consumers can decided what Is the fair price for goods and services. For you to be able to own crypto currency, all u need is to create an account on an exchange, transfer money to buy crypto like Bitcoin or Etherum. Crypto currency is used outside banking and government financial institutions, it is exchanged over the internet. Transactions fee depend on the supply of network capacity at the time. It’s exchange allows trading of crypto for other assets such as fiat or between different digital currencies. It can also be used to control additional units creation and substantial asset.
Fiat currency is a government issued currently that is not backed by a commodity like gold. It gives central banks absolute control over the economy cause they determine how much money is printed. For example, the US Dollars or the Euro (a paper money) is a fiat currency. If central banks print too much of it, it could result to hyperinflation. Fiat has value because the government values it. Fiat only has value cause government maintains it. Fiat started to dominate during the 20th century, it was first used during the 11th century in China, though they have a long history with paper money during the yuan and Ming dynasties. Fiat can can used due to government decree. In the assumption that fiat money is valued, people get more of the goods they want when they trade. Fiat money was widely adopted by many countries during the 18th century. Since then the demand for paper money has increased drastically in many countries resulting in hyperinflation. A fiat currency will lose its value should the government either refuse to, lose the ability or guarantee its value. Examples are, China money and the Zimbabwean dollar. It is dependent on fiscal policy and regulations by the government. It cannot be converted or redeemed. Without the government backing, it is useless and must be protected against counterfeiting and manage the supply. Due to its purchasing power, one can make plans with ease. The fiat money depends on how the country economy is performing and effects of factors on interest rates. It is affordable to be produced than commodity based. An acceptable form of trading for international trade and widely accepted cause of its underlying value. Fiat transactions are traceable and reversible.
The current trend of cryptocurrences in today's world. Digital currency has risen in recent months and have attracted lots of investors. The digital market today has much value and doesn’t seems to be stopping anytime from now. If there is a gross reduction in oil prices and other sell-off stocks, crypto currency is likely to decrease rapidly in value. It is developing rapidly thanks to traditional financial system.
The difference between crypto currency and fiat money is that crypto is a digital currency while fiat is a currency controlled by the government. It is very likely that crypto could replace fiat because of its value and security features. Unlike fiat that take long to process transactions, crypto enables instant process.
Tangibility: Crypto currency has tangibility over fiat cause it operates as a virtual coin while fiat is a physical feel and presents lots of challenges with vast chunks of money.
Supply: Crypto currency has a limited supply of while fiat isn’t limited cause the need for it to be circulated.
Storage: crypto currency as a virtual aspect means it exists online and stored in digital wallets also known as crypto currency wallets. Fiat can be stored in various forms. Payments platform like payooner and PayPal allow people to store money in digital form. Banks also serves as a custodian of fiat currency.
Unit: Crypto includes Bitcoin, Etherum, Litecoin. Fiat includes Dollar,Euro, Pound and Rupee.
Conclusion: crypto currency and fiat stand out as a legal tender as it is used in the purchase of good and service. They also come with disadvantages that has seen so many divided opinion around the world. I terms of standard payments method, fiat seems to have the upper edge as crypto is yet to mature. Crypto currency is likely to create a positive outcome that might change the current system. Crypto still have a long way to go and will face more challenges, the fiat shows the weakness of this form of money. It has the potential to create a better financial system for the society.