January 26, 2022


Accounting + Finance Blog

Seven (7) Reasons why cryptocurrencies are better than Fiat Money

Seven (7) Reasons why cryptocurrencies are better than Fiat Money

The argument for cryptocurrencies to overtake fiat money is ongoing. The Central Banks of various countries are holding on to their fiat while putting restrictions/bans on Cryptos. Bitcoin however has gained momentum. Countries like El Salvador have begun the use of Bitcoin as a medium of exchange. Here, we will discuss why these digital currencies are far better.

The Use of the Internet

The internet is here to stay. And it is through this cryptocurrencies are minted and used as a medium of exchange. Therefore, the risk of disruption is low. The only time digital monies will not exist is when the internet is dead. And you know this isn’t possible.

Portability of Cryptocurrencies

Economics claims that one of the characteristics of money is that they are portable. And digital coins meet this criterion. Whether it is Bitcoin or Ethereum, or other alternate coins, crypto is more portable than fiat. For fiat, you will need to put the money in a pulse. And the larger the cash, the more they need bigger containers to carry it.

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However, for cryptocurrencies, all you need is a computer, a tablet, or a smartphone. As long as there is internet connectivity, anywhere you are, you can have access to your cash, make transactions with the tips of your fingers.

Storage of Value

It has better storage of value than other types of money. People store money for various reasons. This includes buying things, investing, Hodling, and so on. Storing physical gold requires a physical space. And the more gold you acquire the more storage space is needed. This is also true with fiat money. However, you will need a bank to do the storage through your bank account. Gold can also be saved in a bank.

But digital currencies brought a whole new level of storage of value. Your money is stored in the blockchain ledger. Plus, you don’t need to go to any physical place to assess it. With your electronic gadgets, you can access your money at any time. Invest, buy, sell, and so on with ease.

Independence of Cryptocurrencies

Cryptocurrencies enjoy some independence as of now. It is free from regulation when compared with other types of money. Fiat is highly regulated. The central bank or federal reserves can decide to increase or decrease the money supply by using monetary policy measures. As time goes by, the government will find ways to ensure regulation of Bitcoin, thereby reducing independence.

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Limited Quantity leading to deflation

Most digital money is limited in supply. This limited quantity can lead to deflation in the long run. Bitcoin and Litecoin are good examples. The total blockchain protocol for Bitcoin is 21 million units and 84 million units for Litecoins. As a result of the power of demand and supply, if too much money is in circulation in an economy, it leads to inflation of goods and services. The limited operating protocol for digital monies, however, will have a reverse effect on the economy, that is deflation.

Intrinsic Value of Cryptocurrencies

Like fiat money, cryptos have intrinsic value. The value is in what it can do now and in the future. Aside from being a medium of exchange, digital monies will change the way financial transactions are carried out online. Its infrastructure will encourage contracts enforcement, record keeping, payments aside from other things.

Difficult to fake

For fiat, it is easy to create counterfeit. And there are many of these in circulation along with their original. However, cryptocurrency is difficult to fake, if not impossible. It is true that in this world, there is nothing impossible. Therefore, as time goes by, hackers may find a way to create counterfeit. This is true despite bitcoins and others cannot be hacked because of the nature of their theology.

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Bitcoins, Ethereum, and other altcoins are changing the way we see money. However, this type of money is evolving as the days pass by. Before now, people thought Bitcoin couldn’t be manipulated. But we have experienced how Elon Musk and the Chinese government were able to control it by their actions. Despite this, Bitcoin remains a force in the world’s economy.