Cryptocurrency vs Fiat Money

Money also knows as Fiat Money is physical money (paper money and coins). Fiat money is backed by the government and regulated by the central bank. This fiat money is deemed as a legal tender in finalizing transactions. Governments control fiat money and issue policies from time to time that affects their value.

Cryptocurrency is not physical money like paper or coins. It is not a legal tender and not backed by a government or a bank. Cryptocurrencies are decentralized and a digital medium of exchange governed by cryptography (converting plain text into unintelligible text or vice-versa).

There is no essential difference, both fiat and cryptocurrency can be called money currency. Both these mediums of exchanges are used to store and transfer value. Also, they can be used to purchase goods and services. Both have their value governed by supply, demand, work and other economic factors. They have value affected by the quality of the system surrounding it. And they can be traded or exchanged.

Electronic Fiat money is like EFT transfer of money. This is not so hard to track by governments and they can keep an eye out for funds moving around their electronic database. With a cryptocurrency like Bitcoin people can move their wealth in a way without permission when using their individual authority. There is no middleman which have control over this money.

The major difference between Fiat and Cryptocurrency is supply. Fiat money has an unlimited supply. Cryptocurrencies have a cap.


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