What is the Difference Between Fiat Currency and Cryptocurrencies?
Fiat Currency is issued by a government and regulated by a central authority. These currencies act as legal tender and are not necessarily backed by a physical commodity. Instead, they are based on the credit of the economy. Examples of Fiat Currencies include the U.S. Dollar, Pound or Euro.
Fiat Currency has continued to remain legal tender in most countries because they are highly stable and regulated. Their stability allows governments to protect their economies from recession or inflation. Though Fiat Currency is considered stable, economic recessions and hyperinflation over the years have highlighted some of the weaknesses of Fiat Currency.
Unlike Fiat Currencies, cryptocurrencies are not controlled by a central authority. Instead, they are entries in a database that no one can change or manipulate unless specific circumstances are met. Cryptocurrencies are accessible to people all over the world and provide quick settlement times. Unlike other electronic cash settlement systems, cryptocurrencies allow for instant settlements. In addition, lower transaction fees and privacy are other attributes that have made cryptocurrency desirable to some customers.
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