Money’s purpose is to serve as a medium of exchange, store of value, and unit of account. Fiat money and cryptocurrency provide all three functions, although they have several key distinctions.
Two key features of cryptocurrencies and fiat currencies are that they allow for frictionless transactions between two parties and function as a store of value. The trust given to cryptocurrencies is founded on the underlying technology, the blockchain technology, rather than a central authority’s money supply, like in the case of fiat money.
When you buy something with fiat money, you must trust a reliable authority such as a bank or a national government to act as an intermediary and guarantee the currency’s value. In either case, the buyer and seller would trust that the currency’s value will be sustained after a transaction. So fiat VS crypto – what should you know about them and what makes each one unique? Read along to learn more!
What is the fiat currency?
Commodity money derives its worth from the item it is made of, such as precious metals (example: gold and silver).
Because a government declares fiat currency to be legal tender, it has just an assigned value.
What about cryptocurrencies?
Cryptocurrencies are decentralized, digital currencies used as a medium of exchange between two parties.
They eliminate the need for an intermediary such as a bank to execute transactions directly between individuals.
Fiat money is quickly inflating, and central banks can always produce more, but a cryptocurrency such as Bitcoin has a static supply of 21 million units, making it even rarer than gold.
Fiat VS Crypto – the same thing?
The short answer would be: No!
Sure, there may be some similarities, but they are definitely two different things. Cryptocurrencies function as money in that allows two individuals to trade with one another and serve as a store of value. Sure, this also applies to fiat currency. However, cryptocurrencies also come with characteristics that the traditional money system is unable to provide at this time. It may be spent and received by anybody, anywhere in the world, at any time and that is the most revolutionary aspect of it. Furthermore, fiat currency is simply a form of debt.
When a central bank creates currency, it is simultaneously lending you part of your government’s debt. Loans are a major source of government money. When individuals borrow funds, banks issue more money. Unlike fiat money, which appears to rely on debt for a significant portion of its value, cryptocurrency does not. Beyond the confidence of its users, cryptocurrency has an inherent value. In short, it does not rely on a system of debts, since its value is based on how useful it is as a means of exchange.
That is why cryptocurrencies have established a new model for global monetary systems in the future. The system behind cryptocurrencies is completely open and built on math and the consensus of the average user. With all of this in mind, which will be better in the long run: fiat VS crypto? The future holds the answer, and we think our bitcoin casino is part of that future.