Crypto vs Fiat

In this article, we will discuss the differences between cryptocurrency and traditional fiat currency.

Advantages and Disadvantages of Cryptocurrency

When discussing the differences between cryptocurrency and fiat currency, let’s compare the fundamental aspects of each. Fiat money has no intrinsic value on its own. The value of fiat currency is maintained by its issuing government. Cryptocurrency on the other hand can be valued in many ways, which vary between token to token. Usually, the value of cryptocurrency is derived from its utility – and in some cases – overall scarcity.

Some of the general advantages of cryptocurrency are its flexibility; like being able to be used at anytime, anywhere, without the need for a financial intermediary such as a bank. Furthermore, fast settlement times allow for instantaneous transactions as opposed to the electronic cash settlement systems utilized by fiat currencies, which can sometimes take days to finalize.

Some of the disadvantages of cryptocurrency are lack of knowledge. Being that cryptocurrency is still relatively new to most, it is understandable why countries and regulators aren't too keen on cryptocurrency yet. While we’ve discussed not having a financial intermediary as a good thing, when it comes to crypto it could also be a negative. At a bank, if your money goes missing, or you suspect fraudulent activity, you have the aid of the bank to help you get your money back with built-in rules and regulations to help protect the consumer. With cryptocurrency, it is not possible to reverse a transaction. If you send cryptocurrency accidentally, there are no guarantees you will get it back.

Advantages and Disadvantages of Fiat Currency

Fiat currencies comes with their own set of advantages. Fiat currencies are legal tender by design and have existed longer than cryptocurrency. This lends to fiat currency being far more stable than cryptocurrency. This stability allows regulators and governments to easier navigate their respective economies. Most importantly, fiat currency is the globes predominant currency system, making it easy to spend. It’s true that fiat currency has its share of problems, but cryptocurrency still has a long way to go before it can realistically be utilized as the primary planetary medium of exchange.

Fiat currencies are usually considered to be stable to most people who exist outside of the investing community, although this is untrue. Fiat currencies are always subject to inflation. Governments can simply print more money if needed. Fiat currencies typically have an average lifespan of 24 years, before they become too inflated to be of any actual value. Bitcoin on the other hand has a fixed supply of 21M BTC, making it even more scarce than gold and eventually deflationary. Recent economic recessions have highlighted some of the issues associated with fiat money. Even with the greater semblance of control the central banks have over fiat money, cryptocurrency is becoming more mainstream by the day.

Cryptocurrency vs Fiat Currency: Which Contributes More to Illegal Activity

When it comes to fiat money against cryptocurrency regarding illegal activity, it's not easy to say one participates more than the other. The role that cryptocurrency plays in illicit activity has always been exaggerated by FUD articles. It’s also important to realize that there is north of $2T of fiat currency laundered each year. The reality is a small fraction of activity surrounding cryptocurrency is criminal in nature. Chain analysts estimate that a mere 0.34% of the total activity cryptocurrency was used for illegal purposes, since its inception.

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