A long time ago, when the economic system started to transform, fiat (fiduciary) currency appeared. It has become a universal medium of exchange of goods and has established the value of the services and benefits.
How did the monetary system develop?
Initially, coins that were made of rare precious metals played the role of currency. Cost price of such kind of money was high. However, the civilization developed and the value of these coins became unstable, cash deficit was deteriorating, but at the same time, the demand for intermediate accounting units of trade operations increased. As a result, fiat money appeared: the bills people are still using today.
If we consider this concept in a consolidated manner, it may be determined as follows: fiat money is symbolic currency, which emission and nominal value are strictly monitored and systematically regulated by public authorities. Most often bills are made of paper, polymers, plastic, fibers, etc.
Progress does not stand still and the development of Internet technologies has provided an opportunity to convert bills into fiduciary money. These are dollars, yuan, euro, yen, rubles and other national currencies. However, they are stored in the payment systems or on a special bank account.
There are a lot of currency varieties that are known to people. But more recently the world community has met innovative, cryptographic money version.
Technologies are being improved, and a new milestone in the formation of commodity-money relations was the appearance of cryptographic currencies. This money is absolutely decentralized, which means there is no linkage to any banking system. The given feature of modern digital coins is their main advantage.
Certainly, along with classical fiduciary currency, innovative cryptocurrency is actively used and, indeed, they have strong connection. Essentially, these types of money are so different but they can be converted in each other. And this issue is becoming relevant. Let’s consider the options of such conversion.
How cryptocurrency and fiat money are connected?
Modern trends are contributing to the active development of a new investing model – investment into cryptocurrency. A lot of people are making real money by trading on the cryptocurrency exchange, by converting or developing their own blockchain projects. This doesn’t mean that they completely refuse classic payment and pay cryptocurrency for all kind of goods and various services. There is still a need of fiat money for all users.
There are specialized services providing every possible
transaction. Nowadays every internet user can create his own cryptocurrency
wallet and put fiat funds to it. Then through cryptocurrency exchange or online
services he can exchange let’s say rubles to Ethereum or Bitcoins. Such
operations are being conducted for a few minutes without any problem.
So, not to lose on money exchange it is recommended to make transactions on the following resources:
- Online-exchanger. There are many varied converters. Furthermore, people start companies, involved in offline-trading of cryptocurrency and fiduciary money, in megacities.
- P2P services. These platforms provide users a good opportunity to purchase any crypto coin from other people for fiduciary currency. You can also sell virtual means, getting actual money. Payer and
Perfectmoney are considered to be the most convenient services for P2P-exchange.
- Cryptocurrency exchanges. That’s a good way to convert fiat into crypto money and vice versa. It’s better to be cautious, because not every trading platform, where traders speculate in cryptocurrency accepts fiat. You should check in advance whether it’s possible. Bitflip, EXMO and Yobit are good cryptocurrency exchange in this regard.
- Webmoney payment system. Not so long ago this platform implemented the possibility to work with digital currency. Registered users can convert it there. Here withdrawal of funds on third-party services is
not required. Advcash is a good analogue of Webmoney.
Advice! It is necessary to check direct quotations on different services in advance not to lose money during conversion. The best exchange rate will let you to make less expensive transaction and profitable trade!
Fiat and virtual currency: resemblance and distinction
Comparative analysis of the main characteristics of different money forms will help to figure out their considerable nuances. What are the distinctive features between fiduciary fund, gradually disappearing from usage, and cryptocurrency, which is gaining popularity, expanding functionality and also increasing scaling.
Let’s consider the most important aspects.
1.Material analogues. It is well-known that you can cash fiats in metal coins or paper money. You just need to use ATM machine. Cryptocurrency doesn’t have physical analogues: a user can purchase some kind of service or goods only in virtual space (Internet).
Of course, people were trying to create a real existing form of bitcoin, but they did not succeed. For cryptocurrency this feature is a significant disadvantage because absence of network access automatically makes it impossible to use available crypto capital.
2.Centralization. Each fiduciary currency belongs to a specific country. Emission of national currency is the prerogative of the government structure – banks. These government bodies predetermine conversion feasibility, fee amount and other abilities, used by people working with fiats.
It is another story with cryptocurrency. There is no authority that controls an issue of crypto coins. Every internet user is able to mine and spend, for instance, litecoins, ripples or monero. Such decentralization offers great possibilities: there is no financial dependence even from specialized government bodies.
3.Inflation. Fiduciary currency will always “suffer” from inflation. A central bank can produce an unlimited number of banknotes, but national currency value will decline rapidly. The result will be its absolute depreciation.
Digital currency can’t be subjected to inflation. Such feature determines its gradual price increase and this proves its safety.
4.Value. In principle, cryptocurrency and fiat don’t have intrinsic value. It is believed that there is gold reserve held by the government as a guarantee. Moreover, many think that fiduciary currency is reinforced by GDP, but it is also wrong. Despite the highlighted moments, fiat rate is still determined by actions of public authority and its economic policy.
The situation with cryptocurrency is similar in many ways. Such money doesn’t have intrinsic value either. It is virtual. Cryptocurrency price is determined by demand which is on crypto exchange. Some say that there is value expressed by mining and investment costs.
5.Anonymity. It is impossible to remain unrecognized when working with fiduciary currency – income/expenses from bank cards are recorded, a salary is taken into account, big purchases are also controlled by the government. Paper banknotes or metal coins also don’t solve the anonymity problem – security cameras are everywhere, providing high-quality photo and video materials.
Cryptocurrency allows you not to worry about personal expenses and income being revealed. Most of the transaction using the first cryptographical coins are anonymous. Modern altcoins have an effective mechanism of full concealment of information about transactions. There are cons. Now it is not difficult to get any service or product on the internet, including illegal and forbidden ones without being detected.
6.Usability. The difference in simplicity and ease of using cryptocurrency and fiat money is obvious. Let’s assume that a user wants to open an account to store his own fiduciary funds. He must go to the bank, wait his turn, do some paperwork, pay all costs and then use a chip card.
It is incredibly easy to create a cryptocurrency wallet.It would require visiting a special site. You should register there and reaffirm your readiness to register crypto coins; storage. The maximum required time is about 7-9 minutes.
7.Security. There is always someone wishes to steal other people’s money. Technology development also provides different opportunities to hackers. That’s why keeping your investments in fiat is not considered to be safe.
Digital coins are also being stolen quite often, especially from online crypto wallets. Because of that tt doesn’t seem to be possible to praise any kind of currency for safety.
8.Popularity. Fiduciary money are being used everywhere now: almost all countries have implemented such option of working with money into their financial systems. Only 1,51-2,3% of the world’s population know about cryptocurrency due to ignorance of blockchain technology and lack of materials publicized this topic in an understandable way.
Indeed, popularity of digital money is increasing continually, but fiat currency is in a greater demand, anyway.
Considering the given information it is necessary to notice that cryptocurrency has a lot of advantages. Some analytics use this fact for assuming a rapid transformation of world financial system and transfiguration of social and public life.
Of course, there are potential problems whose solutions haven’t been found yet. For instance, it will be extremely hard for governmental authority to lead the economical sphere of the country in case of widespread usage of cryptocurrency. In some countries mass-media tries to create a negative image of crypto coins.
No one disputes the progressivity and reliability of digital money. Moreover, there are no problems with using virtual and fiat currency at the same time. They can be converted into each other easily. You should just use the most convenient and profitable opportunities in particular situations.