Cryptocurrency vs. Fiat Currency

Last Modified:
March 1, 2024

When it comes to money, there are two main types: fiat currencies, and cryptocurrencies. Let’s explore how they compare to each other!

What is a fiat currency?

Fiat currencies are government-issued currencies that are used for day-to-day transactions. Physical commodities like gold or silver do not back these, so their value depends on market supply and demand as well as how "strong" a country is. Governments can regulate fiat currencies and decide to print more should they need to.

This centralized control over the money supply can help solve economic issues like underspending. On the other hand, governments can also overprint fiat money which can lead to hyperinflation and effectively reduce their citizens’ spending power. Examples of fiat currencies include the United States Dollar (USD) and the Philippine Peso (PHP).

What is cryptocurrency?

Cryptocurrencies are digital currencies secured by cryptography to make their transactions secure. Unlike fiat currencies, they require no government or bank backing but operate based on code. Cryptocurrencies get their value from market supply and demand as well. These are primarily decentralized so that no single authority can control them. 

This decentralization means certain coins like Bitcoin cannot just be hyperinflated, nor can transactions be entirely regulated since they transact in a peer-to-peer manner that does not need intermediaries. Anyone can store, receive and send cryptocurrency to anybody in the world. Examples of cryptocurrency include Bitcoin (BTC) and Ethereum (ETH).

To summarize, fiat currencies are government-issued currencies that are highly regulated, while cryptocurrencies are decentralized digital currencies that primarily operate independently from central authorities like governments. 

Read more here: Types of Currencies