Cryptocurrency is a disruptive technology and has already shaken up areas of the financial industry. In particular, it has proven to be a popular alternative investment that is more accessible and has lower barriers to entry than traditional investments like stocks, shares, and foreign exchange.
It has also gained prominence in remittances, and while it isn’t found as commonly as credit card or bank transaction payments, it has become more commonplace with businesses and retailers around the world.
Although crypto shares certain characteristics with fiat currency, there are some distinct differences between the two.
Decentralized Finance
The main difference between crypto and fiat is that, whereas fiat currency is managed and governed by banks and financial institutions, cryptocurrency is decentralized. Instead, cryptocurrency relies on users around the world to process and verify payments using their computers and processors in a process known as mining.
Decentralization prevents any single entity from controlling the currency. This not only eliminates the use of banks but also presents the opportunity for people to mine cryptocurrency and profit from the operation.
Lower Cost, Faster Transactions
Mining is the process by which new coins are minted while processing payments cost a fraction of the cryptocurrency to send. In some cases, cryptos offer completely free transactions. The decentralized nature of crypto means payments are completed within seconds rather than the several days that credit card payments can take.
Cryptocurrency. Popular as a form of investment, it has also become commonly used for remittances due to its borderless payments and reduced costs. And those reduced costs have also seen Bitcoin casino promotions offer improved returns compared to traditional online casino bonuses. It costs casinos less money to process payments, therefore giving the casino sites more expendable income to offer players.
Players can also benefit from instant withdrawals of their winnings, making the casinos more appealing to their players. Retailers and etailers also enjoy many of the same benefits, which is why crypto is becoming a common payment option when buying goods. Play-to-earn games are another genre where crypto has been used increasingly, and mainstream gaming platforms are also embracing these alternative currencies as legitimate payment methods.
Price Volatility
Because Bitcoin isn’t underpinned by any physical asset and the coin itself doesn’t have any underlying utility, Bitcoin’s price can be highly volatile. It isn’t uncommon to see Bitcoin prices increase or decrease by 10% or more in a single day. Other cryptocurrencies can suffer the same or even higher levels of volatility.
Meme coins, which have become popular in the past couple of years, are especially susceptible to high levels of volatility.
However, there is one class of coin that can avoid this volatility. Stablecoins are tied to the value of physical securities, typically a local currency like the US dollar. A coin like Circle or Tether will always be worth one dollar, offering users a chance to hold and use crypto without having to worry about violent price swings.
Security
Cryptocurrency is created using advanced cryptographic techniques. Payments cannot be intercepted and can’t be hacked, which means they are ultra-secure. And, because there is no central institution like a bank, the hacking of accounts and the theft of currency are more difficult.
However, users need to follow best practices to ensure the security of their crypto holdings. Users need to choose a secure wallet, keep their seed phrase safe and away from the device that holds their wallet, and choose and retain a secure password for all their accounts.
Privacy
Privacy is also very different when comparing fiat and cryptocurrencies. Fiat payments are obscured from public view.
The bank or financial institution can see and retain details, however, and these may be passed to third parties, whether intentionally or unintentionally.
Cryptocurrencies are recorded on public ledger records, which means transaction specifics can be viewed by anybody. However, payments do not include details of the sender or recipient.
Payments are pseudonymous, as they include wallet addresses, and with careful analysis, it may be possible to determine more information about a person’s wallet. Privacy coins can help prevent this information from being determined, however.
Other Uses
Both fiat and cryptocurrencies have alternative uses other than as a means of transferring value from one party to another. Via forex markets, local currencies can be used for investment, and this has become cryptocurrency’s main purpose.
Coins like Ether and Solana, however, are utility coins, which means they are used for things like establishing dApps or creating smart contracts on the blockchain.
