Nudrat Fatima

Difference between crypto and fiat currencies Introduction People all over the world are interested in exploring the difference between crypto and fiat currencies. Over the past few years, the word cryptocurrency has gained immense popularity. It has fascinated the people all over the world with its unique features. It is very often referred as the 21st-century unicorn. With this growing popularity, some queries have also emerged regarding the difference between the both. Apparently, both are currencies and have to deal with the monetary dealings yet both lie far apart from each other. This article will highlight the difference between the two types for a better analysis. The meanings The word Fiat has Latin roots. The word was replaced by Faith in English. The basic idea behind the Fiat currency is that it means nothing physically but all its worth is because of the value people assign to it. The worth actually rests on the faith of the people who use it for exchanging it for anything. Cryptocurrency is a contemporary term that gained coin in the early 21st century after the introduction of the Bitcoins by Satoshi Nakamoto. The term refers to cashless electronic money. The term means a decentralized cash system. It includes the peer to peer sharing network. Hence Cryptocurrency can be defined as, “a decentralized and digital medium of exchange governed by cryptography.” Difference between crypto anf fiat currencies on the basis of control The very first difference between crypto and fiat currencies is regarding their control. FIAT is the traditional currency that is centralized and regulated by the central body like a government. The government has the right to add and remove the currency whenever it is required. On the other hand, the Cryptocurrency is not controlled by any centralized body. Their values are predictable. The form FIAT currencies exist in material form. They are in the shape of paper money or coins. The cryptocurrencies on the other hand do not have any physical form. They exist electronically and maintained and exchanged through the digital records. The entire data is shared through an extensive peer to peer network. The border restriction When on one hand the FIAT currency has the restriction of border cryptocurrency has no limitations. In case of traditional currency, the currency holds the name of a particular country. The currency of one country cannot be used in another country. There is no such limitation in case of the cryptocurrency. It remains the same throughout the globe. Difference between the crypto and fiat currencies in terms of security systems Traditional or the fiat money requires a proper system of security. A proper banking system is necessary to keep the money and to regulate it. Crypto money as the name reveals has a different approach to security based on encryption. It does not require any bank or locker for security. The legal tender The status of “legal tender” is another factor important in studying the difference between crypto and fiat currencies. Fiat currency enjoys the said status because of having the centralized control. It is used for taxation and for legally paying the debts. This status lacks in case of cryptocurrency. They cannot be used to pay the debts. Conclusion Despite these technical differences, there is not much difference in their usage. They can be used in trading, purchasing, buying and selling in a similar manner. It is just the mode of existence that differs.