In 2022, the number of people owning cryptocurrencies increased by almost 38% compared to the previous year. Many people began using this financial instrument for investment and international payments.
In this article, we will tell you how cryptocurrency differs from fiat, what prospects it has in the world, and whether you should start accepting cryptocurrency payments if you cooperate with foreign partners.
What is Fiat
The state issues fiat or fiduciary money. They are not backed by precious metals and have no intrinsic value. Fiat money includes any government currency: rubles, dollars, euros, yen, etc. The authority of the government holds their value. Fiat money can be used to pay for goods and services, investments and other financial transactions.
What is Cryptocurrency
Cryptocurrency is virtual, digital money whose value is independent of the government. They are the result of computer calculations.
Payment with cryptocurrency is made thanks to blockchain technology, which is a chain of information blocks that contains all the information about the transactions of the network participants. The blocks are distributed among all owners of cryptocurrency. This eliminates fraud: transaction data cannot be forged, as all network participants control the system.
Read more about the distribution of cryptocurrency in different countries in the article.
Digital and Fiat Money Similarities
Fiat money and cryptocurrency have several common features. The main one is the lack of intrinsic value. Digital and fiat money are not backed by precious metals. Their value is based on general acceptance around the world.
In addition, both types of currencies have a similar scope of use. They are used as a medium of exchange and can be given, stored, sent, received, etc.
Differences between Cryptocurrency and Fiat
The main differences between cryptocurrency and fiat are as follows:
- Cryptocurrency is not controlled by a single authority. This excludes the situation when the state unilaterally changes the rules for issuing money.
- Limited issuance. The state controls fiat currency. The volume of its issue is not limited, leading to depreciation when the state brings many monetary units to the market. There is a limit on the issuance of cryptocurrencies. For example, the maximum number of bitcoins that can be mined is 21 million.
- Transferring cryptocurrency from user to user does not involve third parties represented by intermediary banks. This increases the speed of transactions and significantly reduces the commission.
- All transactions with cryptocurrency are recorded in the blockchain network. This makes transactions irreversible and eliminates fraud. Cancellation of payment and return of sent funds is impossible.
- Anonymity. Identity confirmation is required to transfer fiat money. Transactions in the blockchain system are completely anonymous: the system does not store data about users.
Privacy, security and speed of transactions are significant advantages of using cryptocurrency.
Ways of Cryptocurrency Usage and Prospects for its Development
Cryptocurrency is used for:
- Financial operations. Investment, deposit, trading are operations of this type that include actions aimed at making a profit and preserving the available cash.
- Household transactions. Cryptocurrency can be used like fiat money: to make and receive payments, payroll, send donations and donations.
- Bypassing restrictions related to sanctions, rules of international payment systems, laws of certain states. Cryptocurrency is not controlled by a centralized system and is practically not subject to restrictions. This allows you to transfer payments abroad even under sanctions and unstable political situations. Connecting cryptocurrency payments on the website is a convenient option for companies cooperating with foreign partners.
You can read about 13 ways to use cryptocurrency in our article.
The growing number of users evidences the active development of the cryptocurrency market. According to the Crypto.com report, in 2022, the number of cryptocurrency owners worldwide increased by 39%. By the end of the year, they totaled around 425 million people. Analysts predicted that the quantity of cryptocurrency owners will continue to grow during 2023.
If you doubt what to choose — bank or crypto acquiring — we recommend to read our article.
Cryptocurrency payment has become the main way entrepreneurs accept payments from abroad amid sanctions and restrictions from international payment systems.
Read more about how to accept payment in cryptocurrency in our article.
Cryptocurrency as an Instrument of Global Trade
Cryptocurrency has a number of advantages over fiat currency: anonymity, speed, low fees, and availability worldwide. For some entrepreneurs, accepting payments in cryptocurrency is one of the accessible ways to continue cooperation with foreign partners under restrictions.
Crypto processing for the website, which automates the payment process and makes it more convenient for both the entrepreneur and the client, will help to set up the acceptance of crypto payments. Read more about how to receive international payments in cryptocurrency and use crypto acquiring in our blog or the FAQ section. Contact CryptoCloud support for advice on any issue.