Fiat Currency is the term coined to describe money which is government-issued but is not backed by any type of commodities, such as silver and gold. Today, the majority of national funds fall under this category, with the value of the currency set by individual governments or central banks.
Although they might appear worlds apart, fiat currencies and cryptocurrencies have numerous similarities and remain interlinked as technologies continue to evolve into the future.
The main purpose of fiat currency is to facilitate the exchange of goods and services by being an accessible, functional and practical medium. This resource is virtually infinite, with governments being able to print as much as they deem necessary. However, this power does come with the risk of flooding which results in hyperinflation, making the currency worthless.
In order to support an economy, the value of fiat currencies tends to be stable, with only minor fluctuations. Nevertheless, since the currency is not tied to any commodity there is always a greater risk of an economic bubble than conventional currency.
While, perhaps, the ambition of diehard crypto advocates is to have a world where decentralised cryptocurrencies completely replace fiat alternatives, this does not seem likely for the foreseeable future. Instead, fiat and crypto co-exist in an evolving dynamic, which makes crypto resemble a commodity, rather than a just a medium of exchange.
Cryptocurrencies, such as Bitcoin, Litecoin, Ethereum, and hundreds of others, can be purchased through exchanges with the use of fiat currency. For example, CEX, a popular exchange for margin trading, allows you to buy Bitcoin with USD, EUR, GBP, and RUB.
Many traders use these exchanges to purchase crypto and hodl in the hope that the currency’s value will explode, as it has done several times in the past.
This rise in popularity has given rise to some mega exchanges, including EXMO, which is often seen as an ideal platform for beginners. Attracting millions of users from across the world, EXMO allows you to buy DASH, Monero and others using EUR, USD, RUB, and many other fiat currencies.
The value of crypto and fiat currencies is affected by several common factors, including supply and demand, utility and perceived value, and market dilution. At the same time, a loss of confidence in one type of currency can have a considerable effect, both positive or negative, on the other.
The intrinsic relationship between fiat and cryptocurrencies has led to the creation of trading pairs, similar to those used when trading commodities or stocks. Coinbase, one of the largest global exchanges recently began offering the trading of Bitcoin pairs. Coinbase is also one of the few exchanges which accept alternative payment methods, including PayPal. You can buy Bitcoin using GBP, AUD, EUR, and a variety of other fiat currencies.
One of the most mysterious names of the 21st century, Satoshi Nakamoto is the person or group responsible for the creation of Bitcoin. Nakamoto wrote the Bitcoin White Paper and created its reference implementation. His actions would lead to a revolution in peer-to-peer technology and give rise to Blockchain technology. An Unresolved Mystery While Satoshi […]
Blockchain is the underlying technology upon which digital tools are built. The most popular amongst these tools are cryptocurrencies. In fact, blockchain was developed as a way to support the first cryptocurrency, Bitcoin. Beyond just supporting digital transactions, however, blockchain is poised to revolutionise the world, by facilitating everything from smart contracts to national elections. […]
Fiat Currency is the term coined to describe money which is government-issued but is not backed by any type of commodities, such as silver and gold. Today, the majority of national funds fall under this category, with the value of the currency set by individual governments or central banks. Although they might appear worlds apart, […]
As an experienced cryptocurrency trader or investor, you’ve probably already heard the term margin trading. So far, you have had to use your own funds to speculate, but what if you could amplify the amount you trade, in order to generate a higher return, faster? This, in essence, is the definition of margin trading. Margin […]
Centralised Exchanges (CEXs) and De-centralised Exchanges (DEXs) represent the majority of cryptocurrency exchanges available today. They both carry out the same basic function; that of offering cryptocurrency in exchange of either fiat currency or other cryptocurrency. However, what distinguishes them is the way in which they carry out this function. When Bitcoin was created, its […]
Wallets play a very important role within the cryptocurrency industry, but cold wallets and hot wallets play this role considerably differently. Either type of wallet has its own attributes and limitations which make it an indispensable tool for traders and investors, but these same attributes also make it vulnerable to different threats. Commonalities between Wallets […]
A hardware wallet is deemed as the safest category of wallets as it stores your cryptocurrency offline, in a physical device you can carry around with you. In an industry which is increasingly plagued by malicious attacks and cyber hacks, this cold storage device can help you protect your Bitcoin and other currencies. The Main […]
The most popular way to buy Bitcoin and other cryptocurrencies seems to be with debit and credit cards. However, there are, in fact, several alternative methods which you can use instead. PayPal As one of the most recognisable eWallets in the world, PayPal is used by millions of people. Nevertheless, this payment option is not […]