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Fiat currency and bitcoin are essential to enable transparent transactions. However, fiat currency and this virtual currency differ in one way or another. Satoshi Nakamoto launched Bitcoin in 2009. This entity advocated for a decentralized monetary system and cryptographic verification of this electronic currency as a replacement for national paper currencies, creating an era for digital tokens. This virtual currency has eliminated the influence of the central government and other financial institutions. This virtual currency is not only a medium of exchange, but also a store of value, an investment tool and a protection against inflation. If you are interested in Bitcoin investing, you may consider using a reliable trading platform like Instant Connect
Many people opt for this virtual currency as a hedge against inflation because it is volatile and increases in value over time. In addition, this electronic currency is subject to a strict limit which increases its demand, which results in an increase in its value. Additionally, this virtual currency undergoes a halving process every four years, once the public has mined 210,000 Bitcoins. This halving process decreases rewards, which has the effect of reducing supply and increasing demand. This increased demand leads to an increase in price. This electronic currency therefore constitutes an excellent protection against inflation and many people opt for this electronic asset.
On the other hand, conventional money is strongly affected by inflation. Like gold and other precious metals, fiat money derives its value from itself. Additionally, traditional currency has an assigned value because a government declares it legal tender and therefore has no intrinsic value. Additionally, the supply of fiat money is unlimited since the government can print more money and make it available to the public. Conventional cash loses its value over time; it therefore does not constitute a good protection against inflation.
Any effective form of money must serve as a medium of exchange, a store of value and a unit of account. Both fiat currency and this virtual asset serve as a medium of exchange, a unit of account and a store of value. However, conventional currencies and Bitcoin differ in many ways. This virtual currency is legal tender and its value is linked to currencies issued by governments, such as the euro. On the other hand, the value of this virtual currency lies in the trust that the public places in the blockchain network. If the Bitcoin network presents a negative image, individuals lose weight on the currency, which decreases its value.
In addition, this electronic currency has a peer-to-peer network that does not involve intermediaries during transactions. On the contrary, fiat currency passes through many intermediaries, making transactions expensive.
Issuance and governance
The vital consideration of conventional currency is that it needs an innate value rather than obtaining a recognizable status from its delicate legal status. The value of traditional money is linked to the choices made by governments and national banks regarding their monetary and financial strategy.
On the other hand, this electronic currency draws its value from the blockchain. Most blockchain networks rely on agreement systems known as Proof of Work or Proof of Stake to mint new coins, and many, but not all, have minimized the inventory of custom coins in the agreement. However, when conventional currency and fiat currency are stamped or printed by their representatives, they can be purchased on the markets and held for speculative purposes. Additionally, after stamping, individuals can exchange Bitcoins for different resources.
Conclusion
This virtual currency does not meet the need to consider money because it is ineffective as a means of exchange and unit of account. On the other hand, this electronic money is legal tender in certain countries such as El Salvador and the Central African Republic.
