DIFFERENCES BETWEEN FIAT AND CRYPTO


Some people confuse cryptocurrency and fiat money. The cryptocurrency is a digitised, decentralised currency, produced by the application of cryptography, which, according to the Merriam Webster dictionary, is the “computerised coding and decoding of information”.

Cryptography is the basis that enables debit cards, computer banking and electronic commerce systems. The cryptocurrency is not backed by banks; it is not backed by a government, but by an extremely complicated algorithm arrangement. What gives monetary value is its complexity and security against hackers. How the cryptographic currency is made is just too difficult to reproduce.

The cryptocurrency is in direct opposition to what is called fiat money. Fiat money is a currency that gets its value from the government or the law. The dollar, the yen and the euro are all examples. Any currency that is defined as legal tender is fiat money. Unlike fiat money, another part of what makes the cryptographic currency valuable is that, as a commodity such as silver and gold, there is only a finite amount. Only 21,000,000 of these incredibly complex algorithms were produced.

The cryptocurrency is a means to buy, sell and invest that completely avoids government supervision and the banking systems that follow the movement of your money. In a destabilised world economy, this system can become a stable force.


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