With all the talk of cryptocurrency supplanting the current fiat system, it begs to explore exactly what the advantages of cryptocurrency are. Fiat money has been the standard for a long time, but it does have its limitations. This guide will bring you up to speed on why people everywhere are talking about the awesome capabilities of bitcoin and other cryptocurrencies.
It helps to first understand what cryptocurrency and fiat currency are. For this, it can be helpful to listen to investors like Jordan Lindsey (who we’ve talked about before) who can provide useful information about cryptocurrency. Lindsey has an extensive background in forex trading, so he understands how currency works—whether it’s cryptocurrency, the euro, or the U.S. dollar.
Cryptocurrency and fiat currency are simply stores of value that are used as a medium of exchange. Neither have any useful value on their own, unlike gold or silver. The big difference is that fiat currency is backed by a government and declared to be a legal tender, leaving the government to be in charge of the supply of this currency.
Cryptocurrency, on the other hand, is not backed by a central government or bank. It is a decentralized currency that is globally available. This currency is completely digital and works based on blockchain technology. The supply of it is controlled by an algorithm.
So, what are the benefits of crypto over fiat?
Fiat money is prone to inflation over time. That is why a million dollars in the past had more purchasing power than it does now for example. Whenever necessary, governments can print out more money, causing the supply of the currency to increase and the value of the money already in circulation to depreciate. Jordan Lindsey explains in detail why this happens and how it affects you on his YouTube channel.
Cryptocurrency takes this centralized power away from the government and banks. Because the total amount of cryptocurrency is specified in advance based on an algorithm, it’s not possible to inflate the supply. That means your cryptocurrency won’t decrease in value over time. Rather, it can only decrease from actual market factors.
Even more exciting is that cryptocurrency gives a much stronger chance for your money to appreciate in value. Because cryptocurrencies like bitcoin have a fixed amount of coins that can ever come into existence, they will appreciate as more and more people use them. Imagine that—your currency becomes more valuable without you doing anything. With a fixed total supply, currencies like bitcoin have the potential to appreciate in value as the system shifts towards digitalization.
Most fiat currency is unique and limited to being the legal tender of single countries. With the United States using dollars and Mexico using pesos for example, the fiat system creates difficulties when it comes to crossing borders. Jordan Lindsey, through his decades of knowledge in the forex market, can tell you better than most about all the inefficiencies of having so many different currencies.
Trying to initiate international wire transfers requires relying on banks to handle private information and to set up the transaction. There is a significant delay and investment of time required to go through a process like this.
But cryptocurrency is a global currency. Crypto has no borders and there is no difficulty in making international transactions. This has significant implications for worldwide business. Technology has already succeeded in making the world a much smaller place, and cryptocurrencies take that a step further by simplifying international trade. And while there are some limitations yet to be overcome with cryptocurrencies, people like Jordan Lindsey are building innovative solutions, like the Bitcoin Growth Bot, to make things run more smoothly.
The current system gives all the power to central banks and governments. We already know that because they control the supply of money. The fiat system also allows central banks control over information because the current system provides very little privacy. Any time you initiate any kind of wire transfer or payment, the bank knows how much money you are sending and to whom you are sending it to. Large transfers or payments set you up to be on watch lists or require extensive questioning from the bank.
Cryptocurrencies like bitcoin take this power away from central banks and government. With cryptocurrencies, all transactions are kept on a public ledger and yet your personal information is secure. While all transactions can be verified by the nodes, your personal information is not revealed to anyone. Moreover, this type of system helps prevent fraud since information is spread out and there isn’t a single central server that can be hacked.
Ease of Use
As the world advances more and more people expect things to be faster, easier, and free. How awful is it when you lose your wallet that had $400 and all your credit cards in it? How about when your cash is stolen? The fiat system can be clunky because you need to keep track of all your paper currency. Moreover, you need to rely on intermediaries like banks when you want to make payments.
And using a more reliable store of value, like gold or silver, is very inconvenient. That’s one of the reasons Jordan Lindsey started investing in cryptocurrency. It gave him a reliable store of value, without the inconvenience of transporting bulky bars of gold.
Cryptocurrency keeps up with the rapid digitalization of the world by providing you with an option that won’t be easily lost or stolen. Because your currency will be kept in an electronic wallet, there is no risk of a $20 falling out of your pocket. Your digital wallet can be safeguarded through secure passwords and backed up on other computers. While it is possible to lose your cryptocurrency, it requires a lot of silly mistakes on your part and that is much less likely to happen than dropping a wallet.
The Possibilities of Crypto
It’s pretty clear that cryptocurrency brings a number of new and exciting advantages over the current fiat system. While this technology is still in its infancy, it’s extremely exciting to think about a revolutionized system in which a cryptocurrency like bitcoin is the main form of currency. A new system that is easier for everyone could spread wealth throughout the world. This new system would not only facilitate international business but protect everyday people and their hard-earned money.