There is a difference in speculations about cryptocurrency and fiat currency. While some economists stand with the perception that cryptocurrency is the future of currency others are of the opinion that nothing can replace the importance of fiat currency and it is going to last for a long time.
In this post, we have tried to portray the major differences in the two types of currencies and how each one has its own impact on the world economy. To compare these two types of currencies, we have taken the most popular ones from each category.
For cryptocurrencies, we have bitcoin and for fiat currencies, we have the US Dollar.
1 Bitcoin = 11,290.10 United States Dollar
So, let’s try and understand the key attributes of each of these currency types and figure out the factors that differentiate them.
|US Dollar ($)||Bitcoin (BTC)|
|The US Dollar is a fiat currency. It is a traditional currency that is regulated by the Central financial authority of the US and used by people for day to day transactions.||Bitcoin is a cryptocurrency. It is not regulated by any single organization but held independently by multiple owners from all over the world.|
|Dollars are physical currencies in the form of paper notes and coins.||Bitcoins are digital currencies and there are no physical denominations of this currency in any form.|
|Because Dollars are fiat currencies, a lot of paper goes into making them which means more cutting down of trees.||With bitcoins, there is no involvement of paper and thus there is no cutting down of trees.|
|Dollars are manufactured by printing. Not much electricity is used in the process as compared to the creation of bitcoins.||Bitcoins are not printed like Dollars. They are created through a process called “mining”. This process involves the use of intense amounts of energy. Since the consumption of electricity is higher in bitcoin mining, bitcoins naturally get a higher value compared to Dollars.|
|The regulation and distribution of Dollars are taken care of by the central bank of America, the Federal Reserve. There remains a possibility that the amount of currencies manufactured by the central bank be huge. This can cause deflation.||With Bitcoins, the process of mining is complex and hence there is no chance of creating more than a certain number of bitcoins which makes it deflation-proof.|
|The US Dollar is the official currency of the United States of America. It is used by a lot of other countries as well. However, there is a regional restriction on the use of the US Dollar in countries which have their own strong currencies.||With bitcoins, this is not the case. It can be used all over the world, though it has not yet received the status of legal currency in many countries.|
These were some of the major differences between the US Dollar and bitcoin. Although the concept of bitcoin is a new one, it is gaining an upper hand to Dollar in many ways. The rate of growth of bitcoin is phenomenal. However, it is a volatile cryptocurrency and there are competitors in the industry. To say that bitcoin is the future of transactions is still an understatement.