Bitcoin vs. Fiat Currency – A Complete Guide

An Introduction

The introduction of electronic money has revolutionized the traditional transaction system. And Bitcoin is the most evident example of it. Popularly known as virtual or digital currency in the financial fraternity, Bitcoin is the first cryptocurrency variant, built on highly secure and decentralized blockchain technology. Because of its limited supply, lack of government authority, and valuable offerings, Bitcoin is considered a much better alternative to fiat currencies.

Fiat currency is the regular mode of transaction with a history dating back to over 1000 years. Central banks control the circulation of legal tender. Many factors can affect the value of paper money, such as supply and demand and stock market trading. Although fiat currency itself does not hold any intrinsic value, the government can determine its value and increase its supply based on financial stability.

In this article, we discuss how Bitcoin is distinct from fiat currency and the benefits of using Bitcoin, and the more suitable option for daily transactions.

Differentiate between Bitcoin and Fiat

While Bitcoin and fiat currency has their pros and cons, it is time to look at the significant differences.

• Fundamental Design: Bitcoin is mined by the miners and circulated by the crypto exchanges over the Internet, while fiat currency is paper money printed and issued by the central banks.
• Authoritative Control: Bitcoin is a truly decentralized currency that requires no intermediaries when used for trading purposes. Thus, there is no risk of snooping or monitoring of the transactions by the government agencies. Fiat currency, on the other hand, relies on third-party authorities for any financial transactions. That coupled with the supply, issue, and distribution policies affect its value to a greater extent.
• Anonymity & Transparency: Blockchain technology facilitates Bitcoin transactions and records them in an online distributed public ledger. Though the transactions can be viewed anytime by anyone, it is impossible to manipulate or reverse a transaction, which results in anonymity and improves transparency. In the fiat currency case, banking servers store transactions that restrict access to the general public. Also, there might be instances of unfair transactions from financial institutions.
• Legal Obligations: Because of its digital and decentralized design, Bitcoin is far from legal obligations, and many governments have not recognized it yet. It is not the case with fiat currency that is technically a legal tender and is bound to government laws and policies.
• Transaction Security: Every Bitcoin transaction is secured with cryptographic keys, including public and private keys, preventing unauthorized access to the digital wallet where Bitcoins are stored. Fiat currency can have a physical or online presence that makes it vulnerable to cyber fraud or theft.
• Price Stability: Bitcoin has a finite supply of 21 million that contributes to high volatility. So, Bitcoin value tends to shift accordingly as and when its supply and demand change. Fiat currency comes with a limited supply as well, but the government can increase it at any time. It provides an upper hand to the government in the event of hyperinflation or economic crisis.

Top 5 advantages of Bitcoin over fiat currency

The increasing adoption of Bitcoins for online transactions is made possible by its many advantageous features. Not to mention that speed, cost, and security have been the major factors.

• Transaction Speed: Compared to fiat currency, Bitcoin transactions occur via a digital wallet and over the Internet 24/7. Since there are no banks or financial institutions to mediate, Bitcoin payments are instant.
• Transaction Cost: The fast transaction speed saves users from incurring additional costs that intermediaries usually charge in the name of amount, purpose, and location. The cost of remittance settlement with Bitcoin is minimal or zero.
• Financial Instrument: The volatility of Bitcoin makes it an attractive investment option. Many crypto trading platforms facilitate buying and selling of Bitcoin, depending on its price movement.
• Larger Divisibility: A Satoshi is the smallest unit of Bitcoin, and one hundred million of it constitutes a Bitcoin. It enables people to make the smallest transactions or micropayments.
• Accessibility & Convenience: Anyone can buy, access, and sell Bitcoins as long as they have a digital wallet and Internet connection. Besides, the virtual currency is free from government regulations and works beyond the boundaries, and is perfect for cross-border transactions.

Which is better for daily transactions – Bitcoin or Fiat?

The most honest answer to this question is yet to be defined, and people choosing one over the other can have their reasons. With that said, one can spend Bitcoin on buying or selling goods and services, much like fiat currency, or for trading online. Moreover, Bitcoin is fast, secure, and anonymous, everything desired in a perfect daily transaction. 

However, many investors and crypto supporters are making huge profit from Bitcoin trading. You can also buy or trade-in Bitcoin by using a Bitcoin robot like Bitcoin Lifestyle to gain good profit. Check out Bitcoin Lifestyle Review to get detailed information about this amazing platform.

Conclusion

Bitcoin and fiat currency serve the same purpose – transaction. As the world is rapidly shifting to cashless payments, Bitcoin for its security features looks like a more appealing option. But there is no denying that fiat currency is the most popular way of conducting transactions, even today. While trust and legality seem to be the case in the first instance, the unmatched benefits and flexibility offered by Bitcoin make us believe it a winner over fiat.