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How is cryptocurrency different from regular money?

For years, the debate between using cryptocurrency versus regular money has been a recurrent discussion as various world events spark volatile price movements in the market. However, as more people turn to the internet to buy and sell products and services, different kinds of online modes of payments are becoming increasingly in demand.

These include bank transfers and electronic checks, third-party payment services, and most recently, cryptocurrency.

Yet despite the popularity of digital assets in today’s modern era, most people are still sceptical about completely relying on them as a form of currency. Learn more about digital and fiat currencies, as well as the advantages and disadvantages of using them below, and put all these concerns to rest.

How does cryptocurrency work?

Cryptocurrency is decentralized

Cryptocurrency is a decentralized medium of exchange that makes use of private and public keys, as well as transaction addresses. It is purely in digital form, meaning that it is not backed up by any physical commodity. Aside from being a form of payment, cryptocurrencies are mostly traded for profit and investment purposes.

Moreover, there is no governing body that controls cryptocurrency. Instead, digital assets rely on cryptography and blockchain technology. Blockchain is a public ledger where transactions are recorded while cryptography is the process of coding and storing data securely.

It is stored in exchange platforms or crypto wallets

Instead of banks or physical wallets, cryptocurrency has exchange platforms and crypto wallets where users can store their funds. Crypto exchanges are online platforms where users can buy, sell, and keep track of their digital assets. On the other hand, crypto wallets are used to store your crypto coins and keep them safe.


Users have full control over their funds

There are a bunch of advantages to using cryptocurrency. One of them is that crypto traders have full control over their funds. Unlike in banks or other payment services where you can encounter red tape or bureaucracy issues, in cryptocurrency, you can access your digital assets anytime and anywhere without requiring the permission of anyone but yourself.

Safety and security of personal data

Another advantage crypto traders enjoy is the safety and security of their data. Unless you want to make a transaction with someone else, all of your data is hidden and out of reach of others. This can protect you from hackers and other online threats.


Concerns with illegal transactions

On the other hand, the disadvantages associated with cryptocurrency are illegal transactions. Since it is decentralized, there are no authorities to govern its use. This paves the way for illegal transactions that involve items like drugs or weapons. However, these issues are currently being remedied thanks to the rise of crypto regulations in certain countries.

Losing your cryptocurrency

In the event that you lose your password or lose access to your account, there is practically no way to retrieve your funds. In the world of crypto, one mistake like forgetting your password or misplacing your cold wallet can lead to a total loss of your assets.

The risks of hacking are less, but not impossible either. However, you can trust that crypto-related companies offer security features and updates to keep your funds safe.

How does fiat money work?

Fiat currencies are centralized

Fiat money is a currency majorly used around the world on a day-to-day basis. While it comes in the form of bills or coins, fiat money is not backed up by a physical commodity. Instead, its value depends on its supply and demand, depending on how much is printed by the government.

Dependent on its country’s economy

Fiat money is dependent on the state of the country’s economy. The government is the one responsible for the issuance of fiat money. If the economy is doing well, then the value of the currency will rise. On the other hand, the value depreciates if there is political instability or if there is too much supply in the market.


Availability and a stable market

One of the advantages of fiat money is that you can carry and use it in the countries where it’s accepted. It can also be exchanged for other countries’ currencies for overseas transactions.

Moreover, fiat money is more stable than most mediums of exchange. It is because a central bank has control over the money supply in such a way that it can print more of its currency depending on the country’s need.

This is entirely different compared to cryptocurrency, which can increase or drop thousands from its value within a matter of minutes.


Value can be manipulated by governing bodies or economic factors

Since it is centralized, fiat money heavily relies on a governing body. In this case, people must depend on the government and the country’s economy to determine the value of their currency. Since fiat money is not backed up by physical commodities, it can be subject to economic issues like inflation.

Fiat money can also be the culprit of lower interest rates and other financial issues. If the government ends up printing more money than it should, then the value will decrease significantly while the supply increases.

Should you use cryptocurrency instead of regular money?

While cryptocurrency and regular money have some similarities, they are also different in their own way. Although the world is not yet ready to let go of fiat currency, it is still a good idea to have more options set on the table by investing in and using digital assets.

Cryptocurrency is an alternative asset that is speculated by experts to revolutionize the future of finance, as well as other industries in the near future.

Evidence of this includes the ongoing crypto movement by big corporations as well as governments towards mainstream adoption. Different applications in various industries are also made possible by cryptography and its blockchain technology.

Don’t get left behind and start trading and investing in cryptocurrency! Keep up to date with the latest developments here at Cryptoshimbun.

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