What is the Difference between Cryptocurrency and Federal Currency?

6 mins read
by Angel One

A cryptocurrency is a digital or virtual form of currency (asset) walled by cryptography, a network distributed across a large number of computers which makes it nearly impossible to counterfeit or double-spend. Basically, it is an arrangement that allows for secure payments online which are denominated in terms of virtual tokens.

It works on decentralized networks that support blockchain technology, a system of recording the information in an exceeding manner, which makes it very difficult or impossible to vary or cheat the system. This structure allows them to exist outside the control of governments and regulatory authorities.

Like any other federal currencies, cryptocurrencies have value in units. For instance, you’ll be able to say that you only have 50 Bitcoins, similar to if you have got Rs 50 or $50. However, just like the value of Rs 50 and $50 is different, the value of exchange of 50 bitcoins will also be different.

Because of their political independence and essentially impenetrable data security, the users of cryptocurrency have privileges that were not serviceable to the general currency users. A government can readily freeze or perhaps seize a checking account located in its jurisdiction; it’s very challenging trying to do the identical, where capital was held within the sort of cryptocurrency.

Additionally, cryptocurrencies are generally accustomed facilitate shady dealings or better called black market transactions, a large amount of the regulatory authorities are in suspicion of the use of this currency. In contrast with conventional payment gateways, like PayPal, multiple of the cryptocurrencies do not have any built-in refund functions, although some newer cryptocurrencies have introduced this feature.

Through cryptocurrency, it is easier to transfer funds directly between two parties, without the need for a trusted third party like every bank or other institution.

Cryptocurrencies became a worldwide phenomenon amidst talk that they will replace fiat currencies within the near future. Cryptocurrencies adoption continues to realize momentum partially because of the world’s progression towards a cashless society.

The fact that some people, nowadays, transact through electronic money continues to affirm suggestions that cryptocurrencies may perhaps be the currencies of the future. However, it’ll take it slow before they find their way into the mainstream sector, given the strong opposition from regulators around the world.

Fiat Money may be an affordable currency, issued by the government and controlled by a central authority kind of a financial organization. Such currencies act like tender and are not significantly backed up by a physical commodity. Instead, it supported the credit of the economy.

Fiat currencies like the US Dollar, Pound, or Euro derive their value from the forces of supply and demand within the market. Such currencies are always in peril of becoming worthless thanks to hyper-inflation as they are not linked to any physical reserves like commodities.

The are multiple differences between fiat currency and Cryptocurrencies Although both folding money and cryptocurrencies could also be useful as a technique of payment, there are some differences.


Governments issue fiat currencies, which are reciprocally regulated by the establishment. Currency is deemed a medium of exchange during this it’s often the official means of finalizing transactions. Governments control the paper currency supply and issue policies from time to time that affects their value.

Cryptocurrencies, on the other hand, are simply digital assets that act as a means of exchange that governments do not have any control over. The decentralization aspect means no centrosome can control or influence their value. Some countries have banned cryptocurrencies on concerns that it has varieties, are being employed to fuel illegal activities like terrorism and hiding.


It is not feasible to possess a physical feel of cryptocurrencies as they operate online and are virtual coins. On the other hand, Fiat currency has a physical aspect as it will exist as coins and notes thus, it is possible to possess a physical feel. Folding money physical aspect every now then does present many challenges because it’s a nuisance to maneuver around with vast chunks of money.

Exchange Aspect 

Cryptocurrencies exist in digital form as they’re created by computers and operate as private pieces of code. The means of exchange are thus purely digital. In contrast, paper money can exist in both digital and physical forms. Electronic payment services allow people to paper currency digitally. Additionally, people can transact with one another and exchange money physically.


A primary difference between paper money and cryptocurrency should do with supply. Paper money has an infinite supply which means central authorities haven’t got any cap to the extent they will produce money.

Most cryptocurrencies have a cap when it involves supply, which means there is a collection amount of coins that will ever be in supply. For example, the number of Bitcoin coins that will ever be in supply is capped at 21 million. With currency, it’s impossible to tell the number of money in circulation at any given time, but with cryptocurrencies, it’s possible.


Cryptocurrencies’ virtual aspect means they’ll only exist online thereby be stored in digital wallets commonly mentioned as cryptocurrency wallets. While most digital wallets claim to provide secure storage, a variety of them is hacked resulting in people losing a substantial amount of holdings.

The versatility of folding money, on the alternative hand, means it’ll be stored in various forms. For example, there are payment providers like PayPal that allow people to store folding money in digital form. Banks also do act as custodians of hard currencies.

Bottom Line

Cryptocurrencies and currency include attributes that make them stand out as a technique of the medium of exchange, no matter jurisdiction. However, they also include cons that have seen them still divide opinion around the world.

While there are many advantages of cryptocurrencies over folding money, it seems that cryptocurrencies aren’t yet mature to interchange this standard payment method. It is a matter of some time and not necessarily are within the variability of Bitcoin, Ethereum, or the opposite cryptocurrency. The crypto market will presumably evolve to form a positive product that will change this money system.


There are crystal-clear differences between these two varieties of currencies, but they also coincide in their exchange objective and in encompassing different currencies simultaneously.

For Example: Within the conventional currencies we discover a myriad of names: euro, peso, dollar, penny, etc. the identical happens within the crypto world because, under their name, there are many different cryptocurrencies, like Litecoin, Bitcoin, Davies, Ripple, Dash, Nero, etc.

Many companies and ordinary citizens have found cryptocurrencies an ideal place to make loans, try new technologies, and have command over their own money. Remember, do not confuse value with price.


Disclaimer: Angel One Limited does not endorse investment and trade in cryptocurrencies. This article is only for education and information purposes.