The incredible rise in the popularity of digital money in recent years has been arguably the most exciting phenomenon that we have witnessed lately. A huge percentage of cash in the world is now held digitally rather than as paper notes and coins.
Yet, the newness of some of the terms used means that many people get confused between them. Indeed, a lot of people aren’t sure what terms such as fiat currency and cryptocurrency really mean.
The truth is that there are some big differences between these currencies for you to understand. You can find out lots of interesting details on this subject online. However, the following points explain the main differences.
What Is Fiat Money?
Anything classed as fiat money is simply a currency that has been declared as legal tender by the government of one or more countries. So, the Dollars, Euros or Pounds in your pocket fall into this category. It isn’t backed up by any sort of physical commodity, so you are relying on people taking the notes in your wallet at face value.
In the olden days, currency was backed by tangible commodities, as it was typically made out of silver or gold. However, the money that we use these days simply has its value based on what the government says it is worth and the hope that everyone agrees, as the demand would drop dramatically otherwise.
What Is Bitcoin?
The Bitcoin digital currency started out in 2009 and has grown tremendously in popularity and reach since then. It is something that only exists online, so there is no physical note or coin for you to hold.
Unlike with fiat money, there is no bank involvement in this currency. This means that there is no commission paid and the money can flow freely around the world. It is used to pay for all manner of purchases and for a variety of internet activities such as online casino gaming, as shown in this blog for FIAT and Bitcoin users who are interested i playing slots games, blackjack or roulette online.
The rise of Bitcoin as a viable alternative to traditional money has been due to a need for people in different countries to move money easily and cheaply. The currency is stored in a digital wallet online or on a computer and can be exchanged easily and anonymously on the internet.
The anonymous aspect of Bitcoin trading means that it is seen as being a way of avoiding government or bank interference in the lives and businesses of normal people. There is no way of tracking how has bought what or who has made money using the Bitcoin currency.
Interestingly, it is a currency that hasn’t yet achieved a great deal of acceptance among entrepreneurs in the Black community. Among the few well-known people who have come out in favour it so far are recording artist Akon, rapper 50 Cent and former boxer Mike Tyson.
How Much Is There of Each Type?
One of the interesting differences between these different types of currency relates to the amount of it that there is in the world at any given time.
With conventional fiat money, no-one knows how much cash is floating around the world in wallets and purses, in piggy banks or under mattresses. Governments can print new money whenever they want to and this is criticised by some economists as causing inflation.
On the other hand, the Bitcoin currency is limited to a supply of 21 million. This limit is designed to help maintain the value of the currency and increase spending power over time, rather than see it decreased through inflation.
The truth is that the Bitcoin currency offers a radically different way of storing a person’s wealth than we have ever had access to before. Rather than being limited to the traditional Fiat money that we are used to, this approach has opened up exciting new horizons and a more modern way of moving money.