Cryptocurrency vs Fiat Money
What is Fiat Money?
Fiat money is government-issued currency that isn't backed by a physical commodity like gold. Examples include:
- US Dollar (USD)
- Euro (EUR)
- British Pound (GBP)
- Japanese Yen (JPY)
The word "fiat" means "by decree" - it has value because the government says it does.
Key Differences
| Feature | Cryptocurrency | Fiat Money |
|---|---|---|
| Control | Decentralized (no single authority) | Central banks & governments |
| Supply | Usually fixed or predictable | Can be printed infinitely |
| Transactions | Irreversible, 24/7 | Can be reversed, banking hours |
| Privacy | Pseudonymous | Banks know everything |
| Borders | Works globally | Currency exchange needed |
| Volatility | High price swings | Generally stable |
Pros of Cryptocurrency
- No inflation printing - Bitcoin has a fixed supply of 21 million
- Self-custody - You truly own your money
- Censorship resistant - No one can freeze your account
- Borderless - Send anywhere instantly
- Transparent - All transactions are verifiable
Cons of Cryptocurrency
- Volatility - Prices can drop 50% in days
- No reversals - Send to wrong address = lost forever
- Learning curve - Wallets, keys, addresses to understand
- Limited acceptance - Can't pay rent with Bitcoin (yet)
- Regulatory uncertainty - Laws still evolving
They Can Coexist
You don't have to choose one or the other. Most crypto users keep fiat for daily expenses and crypto for savings/investment.
Why Crypto Exists
Cryptocurrency was created to solve problems with traditional money:
- 2008 Financial Crisis - Banks failed, people lost savings
- Money printing - Inflation erodes purchasing power
- Financial exclusion - 1.7 billion adults have no bank account
- Censorship - Governments can freeze accounts
Bitcoin's Genesis Block
The first Bitcoin block contained the message: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks" - a reference to the financial crisis.