Main Differences Between Fiat Money and Cryptocurrencies

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The entire world is changing because of the quick development of online technology. People are now using different ways to earn money and ensure financial stability. However, the money itself is changing as well. For many years, fiat money has been the only option we all had. Depending on where you live, you have the chance to use Euro, Dollar, Rubles, etc. Things started to change a lot when the planet Earth got cryptocurrencies.

There are many reasons why Bitcoin as well as other altcoins became popular in all parts of the world. You can check the analysis of They analyzed carefully why are people compromising traditional and physical currency over Bitcoin.

Yet, even today, the beginners will manage to hear different stories. Some people still claim digital currencies are only a scam. Of course, everyone has the right to have his own opinion. However, before making conclusions, people should primarily improve their knowledge. More precisely, they need to gather quality information. That is the reason why beginners should start from the very beginning.

We know that some people still do not understand the main differences between fiat money and cryptocurrencies. If you are one of those beginners, you came to the right place. The number of differences between physical and virtual currencies is big. Our list contains the most relevant ones. After you read the list, we are sure you will change your mentality and way of thinking.

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But, Are There Any Similarities?

Of course, they do. People can use them both as payment options as well as a store of value. That is not the case in every state of the world. Not all governments legalized digital currencies. It is one of the differences we will analyze later. Despite that, the value of both types of payments depends on widespread consumer trust. They can’t function if the demand of the people does not exist. Their value is going to reduce, and that happens often in both cases.

The turbulent past is one of the reasons why people do not have more confidence in digital currencies. However, when you look closer, it is impossible to find an industry that was always perfect. Besides, the pandemic confirmed that neither of the business fields that we have today is safe. Uncertainty is a normal thing in the lives of all investors and entrepreneurs.

Differences Between Digital Currencies and Traditional Money

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Here we come to the main part. As we said, people use them both as a means of payment. Yet, the list of differences is much longer. That is something that makes cryptocurrencies more and more attractive in the last couple of years. Let’s analyze one by one.

First Difference – Legality

As you know, fiat money is regulated by the central bank. The value of money depends on different worldwide situations, events, demands, etc. Despite that, the decisions that your government makes also depends on its value. Their goal is to control the supply as well as all the issue policies.

That type of system (if we can name it that way) does not exist with digital currencies. These digital assets are only a medium of exchange. The governments around the world can’t control their value. Of course, the laws in all parts of the globe are slowly adapting to the newest payment methods. When a country legalizes Bitcoin and other altcoins, that will surely have a positive effect on their value. Yet, that is the only thing the government can do. They can control different illegal activities such as money laundering or terrorism support. But, because of the decentralization, they can’t influence its value in any way. We believe it is a change that many people will gladly accept.

Second Difference – Aspect of Exchange

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As you know, the physical form of digital currencies does not exist. They come in the form of code because they are designed by computers. When we talk about the exchange process, it is completely different compared to the traditional one. The entire process of that type is digital.

On the other hand, physical money allows you to exchange money in two different ways. You can do that digitally and physically. However, fiat money also allows you to withdraw physical money from your bank accounts and exchange them physically. That may be one of the main differences you should have in mind.

Third Difference – Tangibility

Tangibility is one of the differences that deserves more analysis. Many people will say they can’t imagine themselves using digital currencies. The reason they say that is simple. They can’t have the physical feel. On the other hand, that aspect is characteristical for fiat money. Many people would even withdraw their fiat money because of that and avoid using it digitally. They feel that paper money has more value in that way.

In other words, traditional money does not come with many challenges. Rules and standards exist in the world for centuries, and people have got used to them. However, digital currencies are still a fresh topic in today’s world. Some of them exist for only two or three years. The challenges you will have to face are different. Yet, those challenges also confirm that digital currencies are the future of humankind. Will they replace physical money is something we will see in the future.

Forth Difference – Supply

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The supply process is probably the biggest difference of all. When we talk about traditional money, the supply is unlimited. All the central authorities do not have a limit on money production. On the other hand, all digital currencies have a cap. For instance, when we talk about Bitcoin, the cap is 21 million coins. When you look closer, that is a most popular advantage of digital currencies. When production is limited, you can be sure their value is more secured.

Fifth Difference – Storage

The last difference from our list is the way how you can store digital and physical money. Crypto users use crypto wallets to store their coins. In most cases, almost every digital wallet is safe. Of course, it would unfair to say everything has been perfect. It happened a couple of times that hackers managed to hack some digital storages. Yet, that happened when the entire industry was still not developed enough. Something like that is less likely to happen in today’s world.

On the other hand, storing physical money is possible in many ways. You can store it on your PayPal, Payoneer account, on your credit or debit card, etc.