As we are moving towards a cashless society, cryptocurrency is the most heard term these days. Gone are those “carrying physical money in a physical wallet” days! The world has transformed into a digital economy.
Across the globe, money is being exchanged through online or electronic payment methods such as online banking, debit or credit cards, digital wallets, etc. Right now, society is on the verge of advancing in terms of economy, finance exchanges, and shift to cryptocurrencies from fiat currencies.
Ever since the launch of Bitcoin, the terms “cryptocurrency, blockchain” are going hand-in-hand. Of course, these are the most buzzing words in the finance world.
Fiat currency refers to the traditional money issued by a country’s government. It is issued and ran by the banks and governments. Fiat currencies are used in regular payments, physical exchanges for shopping, trading, business, etc. The issuance and the money supply is entirely dependent on the central authorities.
The fiat currency is legal and has no intrinsic value. The money gets its value from its own worth, like with precious metals, for instance, gold and silver.
Some of the fiat currencies are Dollar, Rupee, Euro, Pond, etc. They are legal across the countries. These fiat currencies take their shape in coins, notes, and bills. These can be stored physically or in the respective bank account.
The fiat currency exchange can be done physically (by hand) or digitally (transfer funds).
First of all, cryptocurrencies are digital currencies or digital assets that stand as a medium of exchange between two parties. The cryptocurrency is specifically for a digital means of exchange that is secure and transparent. They are developed as an alternative mode of payment for online transactions.
Cryptocurrencies are decentralized in nature and digitally encrypted. This means that no government or central bank owns the digital currencies i.e. cryptocurrencies. The cryptocurrencies are based on blockchain technology, which is organized and shared on distributed ledger technology.
Cryptocurrencies are managed by a network of computers that are managed by a network and are accessible to the network participants. The record of crypto transactions is stored and shared by a consensus-based mechanism so that no data can be manipulated or falsified.
Well, the popular cryptocurrencies are Bitcoin, Ethereum, Litecoin, Ripple, etc. These are all independent and are not backed by any government authority. Hence, while buying or selling cryptocurrencies, no intermediaries will be involved to complete the transaction.
Fiat currencies or cryptocurrencies, both of them are considered as currency or money. They are used as a medium of exchange in businesses or any other exchanges – purchase goods or services, etc. They are used to store and transfer value.
However, both currencies’ values are governed by supply, demand, scarcity, work, and various other economic factors.