As Bitcoin goes through another day reaching a new mark and huge publicity, it is important to inform the public what makes it so different from our paper money.
This post will outline the pros and cons of both the currencies and explain why Bitcoin is achieving all the fame and fortune.
USD and other Fiat Currency Systems
Fiat means “simple” which is pretty self-explanatory. Paper money was introduced into the system in 1861 to help fund the Civil War. The printing of paper money is regulated by a country’s central bank in order to keep the flow of money in line with monetary policy. Moreover, the value of fiat currency is not determined by what it’s made of, rather it is the economic laws of supply and demand that dictate its value. They are occasionally updated to new versions containing security features difficult to counterfeit to create illegal copies.
Advantages of USD
- Can be easily transferred, stored and claimed. You can easily get your cash in physical form with just a single trip to the bank.
- It has the ability to inflate and deflate accordingly to adjust the impact economic problems.
- Metals such as gold, are free to be used for commercial purposes, by not being tied to a currency.
- It is very divisible, flexible and digitally usable. (with the help of credit cards)
Bitcoin & the future of money
Bitcoin was created as a cryptocurrency, by an entity known as Satoshi Nakamoto. People from all over the world can exchange products, credits, and services instantly- without the need for a bank.
The Bitcoin network relies on the blockchain, which is a shared public ledger. It is sort of a database design, where all the nodes hold a copy of the entire blockchain history. These nodes are distributed around the world and attempt to solve complex mathematical equations to confirm a transaction and record it in the blockchain. The nodes are run by mining pools, bitcoin enthusiasts etc. with high computing power. Therefore, the more the computing power on separate nodes, the more secure the network is.
Advantages of Bitcoin
- Bitcoin transactions can be carried out instantly. Money can be sent with ease from one end of the world to the other easily.
- No or very less transaction fees. Bitcoin transactions are extremely cheap with very little or no transaction fees to be charged.
- It is infinitely divisible. At the moment, 1 bitcoin can only be broken down into million smaller units, which are known as satoshis.
- There is nothing hidden with Bitcoin, it is completely transparent. We are aware of the supply of bitcoins and with that, we can even predict its future.
Should Bitcoin be preferred over digital currencies?
Whenever something new is introduced, there is always a certain amount of fear and resistance present in traders. However, with the rapid growth Bitcoin has shown in the past few years, it is becoming every investor’s need. Even a small investment can show twice the doubling of your deposit in a relatively short time period which is not possible with traditional currencies. Bitcoin has stabilized a lot in the past year and with its short supply and increasing demand, it is definitely not slowing down anytime soon.
To be honest, this is up to your personal preferences. Also, people invest in bitcoin because it shows a good profit in a short amount of time, some do it to learn more about the cryptocurrency world while others just enjoy it. Due to its popularity and drastic growth, I’d recommend everyone to get acquainted with it.
Here’s a graphical representation of the differences of Bitcoin vs Paper money outlined:
Tags: bitcoin future, bitcoin news.