A Comparative Guide Between Crypto And Fiat Currencies

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A Comparative Guide Between Crypto And Fiat Currencies

Fiat and crypto currencies are sometimes thought to be similar in nature and scope, but in reality, there are significant differences between the two. As a start, cryptocurrencies such as Bitcoin and Ethereum only exist in digital ledgers, whereas fiat currency can be held and used anywhere.

What is Fiat Currency?

Fiat currency, such as the US Dollar or the GB Pound is issued on instructions by the government of a nation and regulated by a central authority, such as the Central Bank. Whilst original currency was meant as a portable form of commodity, usually gold, this fact has decreased over time. Today, most fiat currencies are based on the credit of the economy.

These currencies get their value from a supply and demand tug of war market. Exports, economic downturns, and uncertainty all lead to this value changing constantly. Fiat currency has existed for over a millennium, and it is seen as a stable and reliable facilitator of local and international trade.

Value

Generally, fiat currencies experience minor changes in their value over extended periods of time. Apart from instances of hyperinflation, where the currency becomes virtually worthless, people have confidence that the fiat currency they own in their wallets will have the same value today as it will have tomorrow.

The same cannot be said for cryptocurrencies, which have a reputation for being extremely volatile. 1 Bitcoin today can easily be worth twice as much or half as much in a week or month. In fact, the crypto community uses the term HODL, which means holding and storing crypto because of the belief that it will be worth significantly more in the future.

Currency Transfer

Traditional money transfers often require one or more institutions which facilitate the transfer at a cost. Banks, payment providers, and correspondent institutions all take a cut of fiat money transfers. As a result, transfers are often slow and expensive.

Cryptocurrency changed all that. In fact, this was one of the reasons behind the development of the technology; to allow point to point transfers in a secure, fast and low-cost way. Cryptocurrency wallets are used to store currency and through the sharing of confidential keys, cryptocurrencies can be quickly transferred.

Furthermore, through convenient exchanges including CEX and Coinmama, you can instantly buy, sell or trade fiat and cryptocurrencies from your computer or mobile phone.

Payments Convenience

Both fiat and cryptocurrencies are available in digital format, and can today be used to pay for products and services. Card and mobile payments have revolutionsed the way markets carry out purchases, by offering convenience and practicality.

However, whilst fiat currency has been and continues to be used for the majority of all global payments, cryptocurrencies have not yet gained enough momentum to follow suit. Items sold in any digital currency, such as Ripple or DASH have their price constantly changing, and this is something consumers stay away from.

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