What is fiat currency?
Fiat. A Latin word term meaning “let it be done” is the money that “civilized” governments of the modern world use. It is, however, not supported by a physical commodity. The value of said fiat currency is determined the relationship between the supply and demand instead of the value of the material that currency is made from.
However, it is not connected to physical reserves which makes it very susceptible to being worthless in the event of hyperinflation. Hyperinflation is the very fast rate of inflation.
Traditionally, it is in bills and coins.
What is cryptocurrency?
Cryptocurrency—also known as digital money—is just that! A digital currency in which encryption techniques are utilized to “regulate” the generating of the currency.
There are so many cryptocurrencies today.
The CEO of the online payment platform—NetCents—Clayton Moore said:
“One major pro of cryptocurrency is that it is another leap forward toward a cashless society, a trend that continues to gain momentum. As the desire for freedom from cash continues, cryptocurrency and blockchain will continue to update outdated financial systems. We are seeing this now as financial institutions are adopting crypto and blockchain, all in advance of the demise of fiat.”
Each of the different currency has an edge of the other. For instance,
Cryptocurrency is comparatively cheaply, internationally, and practically simultaneously.
“Have you ever tried to send USD from your US bank account to an RMB bank account in China on a Saturday in less than 24 hours? It’s simply impossible,” remarked Mr. Fred Montagnon, the CEO, and co-founder of Legolas Exchange.
“Countries and their regulators will likely not abandon their control on their own fiat currency for a cryptocurrency [over] which they have no power,” Montagnon affirms. “Actually, we’ll likely see government-backed cryptos, where states take the best of crypto and the blockchain technology to issue a modern version of fiat money.”
Fiat money can be digital with ease while cryptocurrency would be nearly impossible to be made physical.
So will cryptocurrency overtake fiat money?
As of now, it is yet to be seen. But fast forward to 2050, who knows? The risk outweighs the reward so the overtaking of the fiat currencies by its digital cousins who spell catastrophic trouble.