Cryptocurrency vs Normal Currency
Hello Folks, I am Pico, and Today I am talking about Money. Naah..not ordinary money, about Crypto-Money. I heard about too much and honestly, first I thought it is some betting thing or some investment thing. And I am sure many of you think the same. I dig it down and read about it, read blogs, read its history, and here are my points on this.
Let’s Introduce…
Before the start of the blog, I wanna make this clear… this is not a technical blog..reaching you behind crypto-currency, for that contact Rubrics. He knows better than me.
So, Let’s start:
The buzz around the trend of investment into cryptocurrency has continuously been in the limelight since its establishment. We have seen from billionaire Elon Musk to a common investor, getting involved in the game of cryptocurrency, which many times leave us with a question of what really is a cryptocurrency, and how it is different from the traditional one which we have been using for ages. So let’s find out about these questions one by one.
What is commodity or fiat currency?
Fiat is a form of currency that is centralized, backed, and managed by government authority like US dollars backed by US Federal Reserve. Commodity currency, on the other hand, gets its value from the worth of a physical commodity backing it like gold and silver, and India is one of the countries to use this type of currency. In short, a country’s government and central bank vouch for these currencies’ worth.
What is a cryptocurrency?
Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and to control the creation of new units. They are decentralized, meaning they are not subject to government or financial institution control. They are usually backed by the faith of their users. Some well-known cryptocurrencies are Bitcoin (the first cryptocurrency), Ethereum, Dogecoin, etc.
What makes cryptocurrency different from the normal currency?
Cryptocurrencies are not regulated by governments and lead to concerns about their safety and instability. Cryptocurrencies are also very volatile, with prices often swinging wildly up or down. But, despite their volatility and lack of government regulation, cryptocurrencies are becoming increasingly popular. The total value of all cryptocurrencies in circulation is now over $200 billion. Many experts believe that cryptocurrencies are here to stay and that they will eventually become a mainstream form of payment.
While both types of currencies derive their value from their wide acceptance around the world, there exist some differences:
1. Legality:
Since governments issue fiat currencies, which are in return regulated by the central bank, it is often used as the official means of finalizing transactions. Governments control the fiat money supply and issue policies from time to time that affects their value. Cryptocurrencies, on the other hand, are just digital assets that act as a medium of exchange over which governments have no control, so it has been difficult to make a case for their legal status in different financial jurisdictions throughout the world.
The legality of cryptocurrencies also varies from country to country. Some countries have banned cryptocurrencies on concerns that some of these currencies are being used for illegal activities like terrorism and money laundering. In the United States, for example, Bitcoin is legal but other cryptocurrencies are not. In China, all cryptocurrencies are illegal.
2. Tangibility:
Unlike fiat money, cryptocurrencies have no physical aspect as they do not exist as physical coins or notes. Cryptocurrency operates only online as virtual coins.
3. Means of exchange:
Cryptocurrency exists in digital form so the only means of exchange is online whereas, fiat money can be exchanged physically as well as digitally. An important thing to keep in mind is every cryptocurrency is a digital currency but all digital currency is not cryptocurrency.
4. Supply:
Another major difference between fiat money and cryptocurrency is their supply. Central authorities have no cap to the amount in which they can produce money and thus, fiat money can have an unlimited supply but, most cryptocurrencies have a cap when it comes to their supply, meaning there is a limited amount of coins that will ever be in supply. Hence, it is not possible to tell the amount of money in circulation at any given time but to tell the number of cryptocurrencies in circulation is possible.
5. Security:
A cryptocurrency is stored in digital wallets commonly referred to as cryptocurrency wallets. Many cryptocurrencies are decentralized networks based on blockchain technology which is a fairly complex and technical process and makes transactions hard for hackers to tamper with.
Pros and Cons of Traditional Currency:
Pros and Cons of Cryptocurrency:
Conclusion:
Cryptocurrencies are here to stay because they offer a number of advantages over traditional currencies. They allow for secure and anonymous transactions, they are decentralized, and they are very volatile. These features make them an attractive option for people who want to avoid government censorship or surveillance, or who want to make money by trading them. The future of cryptocurrency is uncertain but cryptocurrencies will likely continue to play a role in the global economy.
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