What makes Cryptocurrency different from Fiat currency?
January 25, 2019 5:16 am,
Cryptocurrency and Fiat currency are the virtual and physical forms of currency, making them similar in some aspects. But they are more different than alike. Since Fiat currency has been in existence way longer than cryptocurrency, the former is more popular and trusted among the users. In other words, we can say that people are more used to Fiat currency. But slowly, the perks and ease of cryptocurrency have begun to reach the crowd. This reach can be attributed to the digitalization process going on across the globe. There are some significant distinctions between the two currencies and they are as listed below:
Centralized vs Decentralized
Fiat currency is issued by the Government as is under its control. Government is the central figure that controls the supply and transactions of fiat currency. If not the Government, there are other government controlled bodies set up to look after the events. Hence, the normal currency is centralized. There are people or institutions accountable for the activities that take place which is related to fiat currency. But cryptocurrency is completely decentralized and is not controlled by any Government or other institutions. Blockchain technology is used by cryptocurrency platforms to check and double check the transactions in altcoins. The users are the ones who verify the transactions and are rewarded for doing so. This is what is known as mining.
Legal tender vs Non-legal tender
Since fiat currency is issued and controlled by the government, it is a legal tender and can be used to buy and sell things in the daily physical markets. This is not the case of cryptocurrency. As it is not associated with the governments, cryptocurrency is not considered a legal tender. The legality of this currency changes from nation to nation. We cannot use them in the physical market yet, the main reason being they are digital currencies.
Easy vs Difficult
Most of the common people don’t have much idea about how cryptocurrency works. It is because of the reason that they are indeed a bot complicated. One must have an intermediate level knowledge on the working of blockchain and the idea of the distributed ledger. Even the term cryptocurrency is a hard nut to crack for some people. On the other hand, fiat currency is a part and parcel of their life. There is nothing more to know about it and this creates an advantage when compared with cryptocurrency.
IPO vs ICO
Initial Public Offering is how companies raise capital for their diversification and other needs. The firms have to go through registration and other legal hurdles to start the process. Also, the additional fee given to intermediate bodies like Venture Capitalists as the process is incomplete without them. On the other hand, Initial Coin Offering is very easy and has no legal complications. There is no need for registration and even startups can raise enough and more money from this. There is no need for middlemen, eliminating the venture capitalists as a whole.
The bottom line is that every aspect of cryptocurrency is much quicker and hassle-free when compared to Fiat currency, but it takes people some time to get the hang of the whole digital currency process.
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