The Bitcoin system is growing on many people because of its advantages compared to the Fiat system. However, the fiat system even though branded to be the traditional stem of moving and storing money, still brings a lot to the table. To understand this further we are going to analyze the two systems to the core and see which one is better.
The Fiat System.
The Fiat currency is known as the centralized currency because it is made and controlled by different governing bodies all around the world. As a result, the fiat currency is not fixed in supply as it can be generated out of thin air by any governing body that wishes to do so.
The fiat currency is not backed by any physical commodity, therefore, has no intrinsic value and as such, it is based on the credit and faith of the economy. Because of this, there is a high risk of hyperinflation and the Fiat currency can quickly become worthless.
Most of the modern currencies are fiat currencies and their value is controlled by the rate of demand and supply in the economy. Central banks in different nations have been given the responsibility of controlling the movement of the fiat currency so they are able to control its supply and through this ensure that economic variables such as interest rates and credit supply are managed.
This is a new form of decentralized currency that is more digital in nature. Some refer to it as a cryptocurrency because of its electronic nature. The bitcoin currency is made by people called miners through a long complicated mathematical process. The mining process takes place all over the world.
They are limited in supply as only 21 million bitcoins can be issued at a time. This means that the bitcoins get to have some form of value with a potential of the value increasing with time. Bitcoins raise in value every day and as at today, there is more than two billion dollars’ worth of bitcoins.
Its decentralized nature is the fact that it is not controlled by any form of government agency or financial institution. It is open to anyone around the globe creating an ecosystem. Funds are thus controlled by the people who are active in the ecosystem. Therefore, there are no additional prints of the bitcoins out of thin air. The miners are the ones who can bring new coins into circulation.
In the Bitcoin currency though there is no insurance and the transactions are irreversible. Once you lose your backed up data you may lose all your money.
When it comes to which one is more advantageous, it terms of time, and the fiat currency has to wait for the money to get back to the bank for it to be reissued again while spent bitcoins are just deposited directly into the bitcoin economy that keeps growing.
A bitcoin transaction involving different people around the globe is quite easy because you do not get to interact with banks. It also has multiple points of operations because of the availability of miners globally. The fiat system however involves a lot of extraordinary fee payments that involve opening accounts etc.
Bitcoins have more security because there is no list of names of people who own the bitcoins, only the accounts and wallets exist online and thus are tamper proof, unlike the fiat currency where your name is on your account and can be accessed by hackers.
The bitcoin system, though unregulated seems like the safest method to go with financially. Their value is always increasing and it is more convenient overtime because it is open to members of the public.