With all the different information swirling around out there, have you ever wondered, “Is Cryptocurrency Different From Regular Money?”
If you have ever thought, is cryptocurrency different from regular money, you’re certainly not alone.
There is still a lot of confusion when it comes to cryptocurrency.
So, let’s see if we can figure this out together!
There are some similarities between cryptocurrency and regular money (fiat currencies), like its portability (easily carried) and interchangeability (one dollar is worth one dollar & One bitcoin is worth one bitcoin). However, cryptocurrency is different from regular money in several ways. Take the fact that there are government regulations on fiat currencies, which don't exist on crypto, at least not yet. Then you have the cryptocurrency "bitcoin" for example, it's finite, meaning once they mine 21 million of them they can't create anymore. Now that can't be said about regular money. Ok, let's go dig a little deeper into this.
First, regular money can be used to purchase products and/or services online and in Brick-and-mortar (physical) locations.
Also, traditional currencies used to be backed by commodities like gold and silver.
Now, they're not based on anything solid.
Money's only true value comes from the trust that people have in it as well as the creditworthiness of the governments that issue it.
Money “fiat currency” got its start in Eastern Asia (China).
However, a shortage of precious metals forced them to switch from coins to paper money.
It wasn’t until the 18th century that the west really started using paper currency.
It was also spreading to the rest of the world at that time.
Although, "according to Investopedia" paper money in the U.S. dates back to 1690 where it was in the form of bills of credit or IOUs.
Now in 1944, forty-four nations reached the “Bretton Woods Agreement” to create the gold standard for a fixed currency exchange.
Then in the early 1970s, Richard Nixon decided to take the United States off the gold standard (A horrible monetary decision "IMHO").
Since then, there has been a lot of people who think the dollar isn’t worth the paper it’s printed on.
Cryptocurrency is a virtual/digital currency that can be used to purchase products or services online.
I and other crypto supporters also believe that some cryptos such as bitcoin can be used as a store of wealth too.
The transactions for most cryptocurrencies (and I'll use bitcoin as an example again) are recorded and verified thru a decentralized system called the Blockchain.
Because of this, it makes them very secure, where it's almost impossible for cryptocurrencies to be taken from you or restricted by entities such as central banks.
Either someone or a group of people calling themselves Satoshi Nakamoto are credited as being "The Father of Bitcoin".
Although no one really knows who he, she, or they are or if he, she, or they even exists.
With that being said, bitcoin was the first fully developed cryptocurrency.
However, prior to bitcoin, there were a couple of attempts to make currencies online secured by encryption.
Bit Gold and B-Money are two examples of this.
Then, in 2009 bitcoin software was first made available to the public.
That’s when the first mining (recording of transactions and verifying of bitcoin) happened.
However, since no one had ever traded bitcoin, there was no real way to value the cryptocurrency.
So in 2010, Laszlo Hanyecz traded 10,000 bitcoins for only “Two Pizzas”, which would be worth about $300,000,000 at the time of this writing!
OUCH!!!... I hope he at least got super supremes, or meat lovers, or something.
Although actually I really feel bad for him, even though not too long ago according to (The U.S. Sun) he said: "I don't regret it. I think that it's great that I got to be part of the early history of Bitcoin in that way. "People know about the pizza...everybody can kind of relate to that and be [like] 'Oh my God, you spent all of that money!'"
So since then, bitcoin has climbed as high as $63,729.50 a coin.
There was also the emergence of alternative cryptocurrencies in 2011, commonly referred to as Altcoins.
A couple of the first altcoins were Litecoin and Namecoin.
Nonetheless, now there are more than a thousand that have been created, and it seems like every time you turn around there Is a new one.
First off, neither of them really has any intrinsic value.
Now basically what that means is that they are not backed by precious metals (gold or silver) or anything similar.
Also, a lot of cryptocurrencies and regular money are both interchangeable.
So one dollar is equal to one dollar.
Just like one bitcoin is equal to one bitcoin.
Next, they are both pretty portable.
Meaning you can carry it around rather easily.
For instance, the Ledger Nano software wallet can fit in your pocket with no problem.
Also, we all know that paper money and coins can fit in your pocket or regular wallet with ease as well.
They can also be divided fairly easily.
For example, you can have 100, 50, 20, 10, 5, or 1 dollar bills.
At the same time, a dollar can be broken down into 50, 25, 10, 5, or 1 cent.
Now, bitcoins go even further.
They can be broken down into a "Satoshi" which is 100 millionth of a bitcoin and represented as .00000001 BTC (bitcoin)... I know... WOW... HUH!
Regular money "fiat currency" is issued by governments and regulated by banks.
Those same governments decide how many of the bills are printed.
So that means any time they want to they can just print more.
Which would seriously devalue the currency.
Now, on the other hand, cryptocurrency is digital money where most of the transactions are recorded and verified using the blockchain.
It is decentralized, which means no government or central body controls or influences it.
You can’t just print digital currency.
There is also the security factor to take into consideration.
Some people keep their regular money in the bank.
You also have people who keep their money at their home, possibly in a safe that's in a closet or maybe even under their mattress.
Although it doesn't matter if you are one of those people, or where you decide to keep your money, there is always a risk of a thief being able to steal it.
Now the reason cryptocurrency is called cryptocurrency is that its transactions and data use cryptographic methods.
Basically, cryptography is where complex math is used to ensure that only the sender and receiver of a message can view it.
Now what that means to you is that if you're receiving some bitcoin you should be the only one that is able to access it, that is unless you share your private key with someone (your private key is stored in your crypto wallet and your private key is what allows you to access your bitcoin).
So when transmitting and storing the data between the blockchain (basically a public ledger) and your crypto wallet advanced coding is used.
In doing this, it provides you with a great deal of security.
Finally, you have to consider supply and value.
Now, as I said earlier.
When it comes to regular old money, there is really nothing stopping governments from running the printing press day and night.
However, with a cryptocurrency like bitcoin, they are finite meaning only 21 million of them will ever be created.
So when you have something with a finite amount like gold and bitcoin that is a big part of what gives them value.
Video Version: Is Cryptocurrency Different From Money? 4 Areas Exposed!
Regular Money is government regulated. Cryptocurrency is not, at the moment that is. Also, It’s not that hard for thieves to rob someone of their cash. However, as it says in (Investopedia) "A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend". In other words, any cryptocurrency that you own should be secure as long as you're careful and responsible on your end. Lastly, governments are free to print money at will. Whereas cryptocurrencies like bitcoin are finite. Which we just established means there will only be a certain amount made and we also know that should definitely add to its value. Now after saying that, there are some similarities between cryptocurrency and regular money. However, I believe crypto and money are more different than they are alike. So for anyone unsure, if cryptocurrency was different from regular money, I hope this clears things up, at least a little bit!