1media/Fiat Money.jpg2021-09-13T08:20:34-07:00MaudieLindJb2e004ad6777c0e3cc2a099bed17dc3ca7c918ba1394853Widely accepted payment methods are considered as money. However, if you pay a person through a form of money like monopoly coins, he can’t use it outside of it.image_header2021-09-14T04:20:54-07:00MaudieLindJb2e004ad6777c0e3cc2a099bed17dc3ca7c918ba1The answer that cryptocurrencies and fiat money are the same is both yes and no. Cryptocurrencies share many features of fiat money but have little more advantages than it because this is an evolved form of money. In history, the purpose of money remains the same, but their forms keep growing. Firstly people trade using livestock as money, and then coins come.
Now, fiat money is used as a legal form of money, but the presence of cryptocurrency is an update of the money system. Many communities did not entirely accept this till now, but slowly it started getting accepted.
Let’s look into similarities and differences to get a clear answer.
Similarities Between Cryptocurrencies and Fiat Money
To consider anything as money should act as a store of value means that currency retains value. A highly volatile currency can’t fall in this category. In the beginning, cryptocurrency was extremely volatile, but the introduction of stable coins increased the use of cryptocurrency as a store of value.
Widely accepted payment methods are considered as money. However, if you pay a person through a form of money like monopoly coins, he can’t use it outside of it. Therefore we can’t consider it as a form of money. When cryptocurrency was introduced, people refused to accept it for any exchange, but in 2020 PayPal offered US account holders to trade this.
Fiat money has a higher exchange value, but cryptocurrency is now making its place as money.
Differences Between Cryptocurrencies and Fiat Money
A cryptocurrency offers more features than fiat money because you can spend it wherever you want. In addition, it is a decentralized, secure, and digitally encrypted currency without the involvement of a third party ( Banks ). This fact about cryptocurrency is what makes it superior.
The value of fiat money is attributed, and there is no intrinsic value, and the government declared it legal. At the same time, cryptocurrency does not depend on the debut system, while the big part of fiat money is debt. On the other hand, Bitcoin has intrinsic value and depends on the effectiveness of its use.
For fiat money transfer, you need an intermediate, while two individuals are enough for cryptocurrency exchange. Therefore, a bitcoin compared to fiat currency has less popularity. However, it is banned in a few countries, but slowly, people started to accept digital currency.
The supply of fiat money is unlimited, and banks can produce money that depends on their will. On the other hand, the production of cryptocurrency stopped once it reached a certain level.
Cryptocurrency is not entirely reliable, and many companies do not consider it the safest mode of payment. This is because of its volatile nature. It can be proved as an asset full of benefits along with higher risk.
Fiat money and cryptocurrency both have a value that you can use to purchase things. However, there are similarities and differences. Cryptocurrency is an evolved form of money; if we go back in history, we can see money evolves. The purpose of all remains the same, only appearance and modes changed.