The term fiat is widely used in the crypto world because it helps differentiate between digital currencies — or cryptocurrencies — and traditional currencies — fiat currencies such as Dollar, Euro, and RMB. There is a heated debate between the advantages and disadvantages of these two currencies. There are proponents of cryptocurrencies that consider digital money to be the economic future while there are many critics who consider cryptocurrencies a dangerous trend that will soon lose popularity.

Before deciding which currency you are going to use, you need to learn the similarities and differences between these two types of currencies and which one best suits your needs.

Both currencies are used for the payment of goods and services, and their value is determined by the recognition and acceptance of their users. In their most basic functions these two currencies are very similar. So, why have people started adopting the use of cryptocurrencies? Unlike fiat currencies, cryptocurrencies are not regulated by a government or central entity. In the same way, the value of cryptocurrencies is determined by their circulation and use while the value of fiat currencies is determined by governments. This control that exists over fiat currencies makes them prone to inflation.

The fiat currency can suffer from an overproduction causing a devaluation, while most cryptocurrencies have a precise amount in existence. This means that no one can create more coins. On the other hand, the durability of fiat coins is limited. These are prone to theft, destruction, or loss because they are a physical and destructible object. Finally, in terms of global transactions, fiat currencies are more restricted, vulnerable, and outsourced. Instead, cryptocurrency transactions are immediate, secure, and can be used from user to user.