Bitcoin and Traditional Currency: How Are They Different From Each Other
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Created as a fallout to the global financial crisis of 2007-08, Bitcoin is the world’s first and most recognizable cryptocurrency. Many people say that the creation of Bitcoin was done to expose the failure of traditional fiat currencies.
The impact of Bitcoin does not extend only to the economic or financial spheres. It has repercussions on the political, social and legal aspects of countries and societies. In this article, we will look at some of the major differences between Bitcoin and traditional currencies.
We are no one to pass judgments on which is better or which is worse. We would request you to draw your inferences post reading the list of differences.
Top 5 Differences between Bitcoin and Traditional Currencies: The List
1. Government Control-
Traditional fiat currencies are regulated and controlled by the government. They decide on the currency rate, values, norms and regulations regarding the use. In other words, government decided whether your traditional money and the source is legal or not.
On the contrary, Bitcoin is a decentralized form of currency. It is not subject to the rules and regulations of national governments or the monetary policies of central banks. This makes it independent of their control. The global nature of Bitcoin challenges government sovereignty.
2. Transaction Fee and Commissions-
Traditional fiat currencies need to take approval from multiple channels of authority to pass. You have your central banks, the local banks, and the payment processing authorities, like Visa and Mastercard. All these people take a cut or commission of your money to simply process it and pass it on.
Bitcoin is revolutionary, in that it eliminates these intermediaries who take commissions for processing something for free. You do not need so many authority bodies to send home money to your ailing parents. This ensures that the money you send is received in full at all times.
3. The Supply Factor-
When the economy needs money, governments simply print them. They regulate GDP, Inflation rates and currency values and the magic happens. This means that traditional fiat currencies are in unlimited supply. If there is a need, the Mints are going to print more money.
Bitcoin does not create such devaluations and confusions. The supply is limited, which will lead to a demand appreciation. This is what contributes to making Bitcoin a great investment asset.
4. Nature of Transactions-
If your transaction traditional fiat currencies to someone, that money can get refused, withheld or stored by anyone of the regulating authorities. You will be shocked to know that financial bodies earn billions of dollars in interests, simply by holding on to funds for a single day. In other words, the transaction is reversible in nature.
Bitcoin transactions work in exactly a different manner. The transactions are immutable in nature, meaning that once they are made, it is complete. There is no scope for the transaction to get locked in between somewhere. This makes it important to verify who you are sending Bitcoins too. If you send them once, you cannot get them back.
5. Inflation and Recession-
Traditional fiat currencies are subject to the rise and fall of economy. Their valuations are not static. A leader takes a poor policy decision and boom; your hard-earned assets depreciate. According to experts, this is one of the biggest criticisms of traditional currencies. Their valuations are subject to emergencies, crisis and poor decision-making.
If you take into account the above differences, you will see why Bitcoin is emerging as a viable form of investment. Investment platforms like bitcoin circuit are using these advantages to help normal people invest in Bitcoins and other cryptocurrencies.