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To know if it is possible for fiat currencies and cryptocurrencies to coexist, we first need to understand what fiat currencies are and what cryptocurrencies are.
What is Trust Money?
The fiat currency is the money that is in your wallet or bank account, that is, they are the paper coins or banknotes used widely all over the world.
There are several fiat coins, all of which are issued by the government and do not have an intrinsic value. But the fact that it has no intrinsic value does not mean that it has no value.
Each coin is paid for by the government responsible for issuing it.
What are cryptocurrencies?
Cryptocurrencies are the famous digital or virtual currencies.
Their association with the digital environment is related to the fact that it is not possible to carry out any movement without using an internet connection.
As with fiat money, there are several cryptocurrencies, all of which are powered by blockchain technology , which allows all transactions to take place securely.
What are the main similarities and differences between cryptocurrencies and fiat money?
Cryptocurrencies and fiat money share similarities and differences, let’s start with the similarities.
The first similarity is that both have no intrinsic value, that is, they are not based on commodities such as gold and silver, both have their value associated with global acceptance.
You can carry out the same transactions using both currencies, you can pay for goods and services, make transfers, buy a gift among many other transactions.
Another similarity is divisible factor, just as 1 dollar can be divided into 100 cents, it is possible to divide 1 bitcoin (BTC) into 0.00000001 BTC.
Once we are aware of the similarities, let’s look at the differences between the coins.
The main difference between fiat currencies and cryptocurrencies lies in the fact that they are not issued by governments, being decentralized, that is, no authority can decide to issue more cryptocurrencies, dilute their value or make any changes.
Because cryptocurrencies are decentralized, they don’t need third parties to perform the validation of their transactions, as banks do with fiat currencies. Transactions are verified using blockchain technology , which records all transactions permanently and irreversibly, ensuring all process security.
After all, can they coexist?
Due to the increase in the number of people using digital currencies, many talk about cryptocurrencies replacing fiat currencies, but the two offer different advantages.
The biggest criticism of fiat money is related to its susceptibility to inflation. Governments can increase the supply, diluting its value.
In a strong economic instability, hyperinflation can occur, which quickly reduces the value and reliability of the currency. On the other hand, cryptocurrencies like Bitcoin have a fixed offer, which leads many people to keep their coins, increases their value in the market.
Despite the wide acceptance, the adoption rates of cryptocurrencies are still low, compared to fiat currencies, which are widely used around the world. The complexity in handling digital currencies ends up interfering with their dissemination, but the advancement of technology and the way we deal with it may change that.
We can agree that cryptocurrencies are part of our reality and should continue to be, and may in the future become the most common form of money used.
For now, cryptocurrencies maintain a good relationship with fiat currencies, allowing them to coexist in a friendly way, it is up to users to choose the best option, according to the need.