What’s The Difference Between Fiat And Cryptocurrency

The best way to learn about the differences between fiat money and Cryptocurrency is to have a discussion about money. We know what money is, we use it every day. We use it to make purchases in real life and online, we use it to invest in financial instruments (Such as RRSPs, and Mutual Funds), and even for the purchase of assets such as property.

Money (or, fiat for the purpose of this blog post), is issued by a government and declared a legal tender. In Canada, our Canadian dollar is our legal tender and fiat. Additionally, the value of fiat money is derived from supply and demand, NOT the value of material it’s made of.

HOW DOES CRYPTOCURRENCY COMPARE?

The term cryptocurrency is actually an alias, it doesn’t mean the currency that is cryptographic. For example, when “cars” were first introduced to the world they were called “horseless carriages”. It’s in this same way that we should consider “cryptocurrencies”, as an alias for “blockchain tokens”.

Blockchain tokens are a technology that is being used a new and decentralized monetary system – that is separate from fiat and traditional commodities.

When blockchain tokens are applied as cryptocurrencies, these tokens are considered digital money. Cryptographic techniques are used to control the money supply, and verify transactions, without the use or need to rely on a trusted third party (like a central bank), by operating on a blockchain. The blockchain is a digital and public ledger that records all the transactions conducted in a specific cryptocurrency.

HOW MANY CRYPTOCURRENCIES ARE THERE?

The world of crypto has exploded. There are too many coins and tokens to mention in one blog post. There are a few that have been around for a while and perhaps established themselves as slightly more mainstream such as Bitcoin, the first decentralized cryptocurrency.

Once you delve deeper into your crypto journey, we’ll start to cover more of the various types of crypto and what you’ll need to know about them.