Today, we’re going to talk about the charged debate of fiat (conventional money like the US Dollar or the Euro) vs. cryptocurrencies.
With the proliferation of decentralization, Web 3.0 tools, blockchain applications, and cryptocurrency usage, it’s now more important than ever to know what are the fundamental pros and cons of both systems.
We’ll begin with some hard facts about fiats and the institutions that facilitate them, mainly banks.
Banks: The Shortcomings
Do you know why a bank transaction is seemingly instantaneous? That’s because, in the case of bank transfers, only numbers are being arranged. There is no actual value that is being moved.
Incidentally, the only limit to the speed of such a transfer is the internet speed—Which is amazingly fast in the modern world. That’s not how cryptocurrency transactions happen.
- When you send or receive cryptocurrency, some actual value is moved.
- This requires time and something called “confirmations.”
- People who mine are actually validating “blocks.” A block is a set of transaction records (among other things).
- Only when it has reached a certain number of confirmations is the transaction greenlit.
- The actual movement of assets through the blockchain is cryptographically verifiable, not prone to any system errors, and still so fast that certain cryptocurrencies handle 10,000 transactions per second (not all, however, such as the Bitcoin blockchain can only handle 7 per second).
- Besides money, the blockchain system is also used to move other types of assets that are used by larger businesses simply because of increased safety.
So, essentially, the debate isn’t about what’s “real” money or even what’s better. It’s a debate between the conventional banking system and technology. You can choose either or both—That’s the remarkable thing about it all.
The Benefits Of Cryptocurrencies
Banks are not the enemy or archaic. Good cryptocurrencies don’t aim to take banks out of business. That’s a futile endeavor, and any project that wishes to attempt it is fundamentally flawed.
Cryptocurrencies wish to make transacting easier for those who need easier transactions.
Suppose you’re doing well with your traditional banking system and are comfortable with centralization, fast speed, and feeless transactions. In that case, there’s no practical reason to move all your wealth into cryptocurrency wallets.
The job of a dependable cryptocurrency like BTC, ETH, USDT, XRP, ADA, SOL, DOT, LTC, AVAX, etc., is to build better financial infrastructure for the future.
This is exactly why there can’t be any country-specific, national, or government-backed decentralized cryptocurrency, as that will defeat the whole purpose.
To achieve a world that facilitates decentralized finance, platforms like https://cryptocurrencyhelp.com/ strive to make cryptocurrency more accessible to everyone.
After all, while fiat is important for the population of a country and for the citizens of the world, cryptocurrencies open up a new realm of technological advancements, allowing everyday people to exchange value, process fast transactions, and enjoy an element of security.
Ultimately, the lack of an intermediary and the trustlessness of the system make blockchain transactions remarkably safer and more resilient than fiat transactions.
Transaction Speed And Accessibility
Fiat currencies are issued and regulated by governments and have been the traditional medium of exchange for centuries now.
They are widely accepted and easily accessible through banks, ATMs, and various localized payment systems such as QR code payment apps and remittances. Transactions are real-time, so they’re ideal for daily expenses and retail purchases.
Cryptocurrencies like Bitcoin and Ethereum operate on decentralized blockchains (IBM has a reliable guide on what these things actually are), offering some unique capabilities.
Some cryptocurrencies can facilitate rapid cross-border transactions, but it’s not rare for transactions to take longer confirmation times due to network congestion.
Borderless peer-to-peer transactions to and from regions lacking proper banking infrastructure can gain access to cryptocurrencies with just the internet and a smartphone.
Fiat VS. Crypto: Which Is Good For What?
Cryptocurrencies offer people like you and me an alternative method of conducting transactions and managing assets.
Both fiat and crypto offer unique advantages and applications, so it’s important to fully comprehend their strengths and weaknesses to make more informed decisions about the current financial system.
- Security and Privacy: Banks and other intermediaries are prone to security vulnerabilities. Personal data or funds can be exposed due to their centralized systems. In cryptocurrencies, it’s practically impossible to do a 51% attack to take over a widely used blockchain like BTC or ETH.
- Volatility and Investment Opportunities: Fiat currencies are more stable compared to cryptocurrencies, but both react to market events and global crises, for example. Inflation can erode the fiat’s value over time. Therefore fiat is generally good as a medium of exchange. Volatility in cryptocurrencies offers trading opportunities with some risks—And they are more of a speculative asset or long-term capital asset than a medium of exchange.
Read our six tips on using crypto for more in-depth advice.
In Conclusion
Both cryptocurrencies and fiat currencies offer their own strengths and weaknesses. Fiat has had time to grow on us—It’s accepted and used all over the world. That’s why we consider it safer.
But would you rather choose something that’s technologically superior and safer? Well, it depends on your use case!
