No matter how popular they are still becoming and how many more investors from all walks of life are investing their money in them, virtual currencies are still not as familiar to everyone. They are still not popular or fascinating as they need to be if we are to move forward as a society and that is evident by the fact that many people still do not know what differentiates them from regular money.
The truth is that they could not be more different even if they wanted to, which makes them the obvious solution for most of the struggles modern civilization has regarding economy and business. In a small effort to help this cause we decided to devote this article to explaining the differences once again and bring to you the main ones.
There can never be too much information about this, not until cryptos become fully mainstream and we actively start to adopt them with less to no skepticism, fear, and hesitation. To learn more about all of this and get one step closer to understanding everything there is about the world of cryptocurrency, make sure to check out www.ibtimes.com.
1. The Use and Value
First and foremost, the very use of these two types of currencies is very different. With regular money you know, like the dollars and euros of the world, you simply exchange it to acquire something like goods or services. With cryptocurrencies, the most used way in which they are exchanged is trading for other cryptos. Their value is different because it does not only give you the means of exchanging it, since it is an asset you already have that others can buy from you. Therefore, cryptos are more like assets and valuables than money.
2. Existence and Physicality
Another obvious but important difference between the two is the presence of cryptos versus the presence of fiat (traditional) currencies. Real money is of course physical and you can touch it. On the other hand, cryptos are entirely digital and they do not exist in our world, the real world. They are only online and in the code. Crypto is virtual while dollars, pounds, and rupees are physical.
3. Prevalence and Globality
Unlike regular money that is tied to specific countries or groups of countries, virtual currencies belong to no specific government, state, or nationality. We know the euro as the official currency of the European Union countries, while the dollar is the name of over 20 different types of money used in multiple countries as the official currency. Bitcoin, for example, belongs to nobody and it is a global currency anyone can use wherever there is the right means of trading, selling, and buying. The same goes for all other digital currencies.
4. Control and Oversight
The fan-favorite aspect of digital currency is the lack of laws and regulations as well as other things usually imposed by governments, central banks, and other institutions that control and oversee traditional money transfers. No financial reserves exist and their core does not belong to a specific thing whatever it may be.
The users and the blockchain technology responsible for its creation and maintenance have all the control and there are no intermediaries and third parties during transactions. Since most people are tired of their governments and the rest of the higher powers intervening in everything, this was the initial hook that won over the people who want to be and feel more free with their finances.
5. Influence and Inflation
Real money and its worth is tied to the events in the world, from natural disasters and shortages of important goods to relationships between countries and the health of their stock exchanges. Interest rates and inflation have been problematic in the past and it takes years, decades even, for the economy of a country to recover from a devastating market crash and the lack of funds. With digital currencies there are no such problems because all that dictates and influences its worth, fame, and spread is the supply and demand. Some are finite while others are infinite, but none of them rely on the actual things happening in the world in the same sense that traditional money does.
6. How they are Created
The governments are the ones who issue the regular currencies to people and print new money when they can or need. Based on the ways new money can be acquired and the strength of a country’s economy, the government has more or less room and chance to allow its citizens better conditions based on the value of their own currency when compared with the rest of the world.
This means that the money is centralized and revolves around what happens inside the borders, as well as the banks, investments, and countless other things. New cryptos are made and found through mining, an activity in which powerful computers solve complex algorithms and add blocks of information and transaction to the blockchain. They are awarded for this work in cryptos and there is no other interference. Governments have nothing to do about it whatsoever.
7. Transfer Speeds
You know full well how slow regular money moves. The value transfers can take so long and the bureaucracy surrounding does not help one bit. With cryptos and their peer-to-peer approach, the payments are near instant and without anyone else participating or taking a cut. You and your business partner are the only two people in the transaction and no paperwork is necessary to complete the purchase or trade. Best of all, the taxes and commission costs barely exist and are only there to support the infrastructure needed to carry out the transfer. Not only are they fast, but irreversible too!
Last but certainly not the least, and actually one of the best things about cryptocurrency, they are almost entirely anonymous. Not even the person you are doing business with has to know your name or location. All there is to it is a string of seemingly random numbers and letters that is your electronic wallet address.
You have your own password that you do not give to anyone of course. The address is what the other person needs to issue the transaction and that is it. The work is done and nobody knows about it. It is however documented and becomes a part of the blockchain, available for anyone to see but your anonymity still prevails. A ledger is there online for anyone to see, guaranteeing transparency but not the personal info of the people and organizations doing business.