Fiat money is an age-old traditional medium of exchange in the form of tangible currency like rupees, dollars, or pounds that are issued by the government of a particular country. Fiat money can also be expressed as bank credits and are managed and issued by the central bank of a country. Whereas, cryptocurrencies form the substitute for the traditional payment methods like cash, debit or credit cards and cheques. The transactions involving cryptocurrencies are purely digital, involving cryptographic techniques. Apart from this, the basic difference between the two lies in the fact that the transactions involving fiat money are traceable as the money is stored in a person’s bank account. So, the details of the sender and receiver can be easily tracked. But in the case of cryptocurrencies, the transactions are made from the crypto wallet, where the details of the sender and the receiver remain undisclosed.
Gradually the Fiat money is in the process of transition and is eventually evolving to cryptocurrency. As such, the evolution of cryptocurrencies can be traced back from the primitive methods of payments that included gold, seashells, copper and even salt to the newly emerged cryptographic payments. The evolution of cryptocurrency has given birth to a new generation where frictionless money is the main method of payments.
Fiat money has its own set of disadvantages and is backed by absolutely nothing. In such a case, cryptocurrencies are a robust solution to all these flaws existing in the current financial market. Let’s put the things in the correct order to analyze how cryptocurrency can stand tall and give a tough competition to the 7th Century Fiat money.
Disadvantages of Fiat Money
Fiat money does not have any intrinsic value and is considered as a legal tender by the government, based on the credit of the country’s economy.
Fiat money is paper-based, not backed by any commodity, and subject to inflation; these constitute the main disadvantages of Fiat currencies. This makes the fiat currencies lose their value over time.
The responsibility for printing the Fiat currencies lies solely on the government that exercises unlimited power to print the money whenever it wants. In fact, given this freedom to print money anytime, it often makes the government “overprint” money than it is actually required, thereby increasing the money supply artificially.
Advantages of Cryptocurrency
More Confidential Transactions
This is perhaps the main advantage as far the crypto transactions are concerned. Crypto transactions are done from the crypto wallet and the details of the sender and receiver remain undisclosed, thereby shutting away the complications that may appear in certain countries where Bitcoin casino is considered illegal. Banks and other financial institutions sometimes deny to process the payments when they find the payments are associated with online gambling. This mars the players’ fair chance of winning the stake. This does not happen in case of crypto payments because the payments are made from the crypto wallet without disturbing the personal details of the players.
Moreover, contrary to the crypto payments, banks charge high transaction fees for processing the payments.
Easier International Trade
With cryptocurrencies, there are no restrictions on transactions. The user can send any currency from anywhere to everywhere. This works for the ease of international trade and inter-country transactions as the functions of cryptocurrencies are managed independently without the central bank controlling them. The cross-border payments are made easier that in turn, makes the international trade much simpler.
Cryptocurrency transactions are immutable. That is to say, once the transactions appear on the blockchain-based cryptocurrency, it becomes irreversible. So, it becomes impossible for hackers to execute any fraudulent transactions. This makes the payments secure; crypto coins cannot be copied, faked, or even spent twice. The decentralized nature of blockchain technology makes sure that the integrity of cryptocurrencies is maintained at every point.
Therefore, Cryptocurrencies are way a lot better than Fiat currencies, given the requirements of the modern generation. It is also skeptical if cryptocurrencies do not replace fiat currencies in the days to come.