Our world is changing and developing, doing it quickly and dynamically, affecting all spheres of activity; especially the one we use every day – the financial system, which involves another important and pleasant sphere – the entertainment industry. Nowadays, many online casinos offer convenient banking options for their customers, including fiat and crypto-assets. For those who use credit cards for online payments, finding a casino with such a payment option is not a problem. Still, cryptocurrency enthusiasts need to look for quality licensed casinos accepting cryptocurrencies. Among them, you can find Litecoin casinos, Bitcoin casinos available in Australia and other countries, as well as one of the best Ethereum casinos in the United States, and enjoy top-quality games from the best providers and payment methods that suit your needs.
In this article, we will look at the details of fiat and cryptocurrencies as well as their current financial systems.
Fiat and Crypto Assets
Fiat currency refers to money issued by a country’s government. It is a traditional means of exchange that takes the form of tangible currency like dollars, pounds, yuan, and so on, or can be represented electronically like a bank loan.
Cryptocurrency, in turn, replaces traditional payment methods such as cash, credit/debit cards, and checks. It is based on a cryptographic technique that converts basic text into illegible code. As the name suggests, cryptocurrency is a means of exchange present in digital form and is completely secure due to encryption technology.
The traceability of fiat transactions is one of the main differences between these two types of currency, meaning you can easily identify the sender and receiver of the money. In contrast, cryptocurrency transactions are digitized, and encrypted to be incognito – thus, the sender’s and receiver’s names remain undisclosed.
|Basis for comparison||Fiat Currency||Cryptocurrency|
|Definition||Fiat currency – has no intrinsic value, but is considered legal tender by law.||Cryptocurrency – a virtual currency that uses encryption technology to securely facilitate a transaction.|
|Central Bank||Issued and managed by the central bank.||Operates independently from the central bank.|
|Unit of measure||Dollar, rupee, yen, euro, etc.||Bitcoin, Ripple, Ethereum, Litecoin, etc.|
|Presented||Coins, banknotes||Private and public code fragments|
|Deal value||Low||Relatively high|
|Place of storage||Stored in a person’s bank accounts.||Stored in a person’s digital wallet.|
Definition of Fiat Currency
Fiat currency is known to have no intrinsic value and is managed as legal tender by government regulation. Such currency is issued by the government but does not have any physical commodity for backing such as gold or silver; instead, it is based on the economy’s credit. Thus, fiat currency can lose its value in case of inflation or become worthless in hyperinflation.
Fiat currency includes paper money, coins, banknotes, etc., which has a means of saving and is used as a medium of exchange to buy products and services. Its value is determined by market forces and the stability of the government issuing or declaring fiat currency.
Fiat currency emerged as a substitute for commodity money and representative money. With the introduction of paper money, the role of central banks in the economy has increased, as they control the printing of currency, that is, the money supply in the economy. A huge drawback of fiat currency is that printing the currency on a large scale can lead to hyperinflation.
Definition of Cryptocurrency
Cryptocurrency is a digital currency launched as a medium of exchange that uses secure cryptography to generate and control monetary units safely and verify the transfer of funds. Crypto assets use many encryption algorithms and cryptographic techniques such as public and private key pairs, hashing functions, elliptic curve cryptography, etc., to reduce the likelihood of tampering and fraud attacks.
Cryptocurrencies are decentralized by nature; therefore, there is no government interference with such currencies. Crypto assets are based on blockchain – a distributed ledger technology. Blockchain has a network of computers containing an exact copy of the database and updating its records by consensus using pure mathematics.
Cryptocurrency is a system that enables secure online payments, called a virtual token, with ledger entries internal to the system itself. A token is nothing more than a type of privately issued cryptocurrency. It is a standard of value created by an organization to manage its business model and give users the right to work with the products while helping share profits among stakeholders.
Bitcoin was the first-ever decentralized cryptocurrency, presented in 2009. Besides Bitcoin, there are other cryptocurrencies such as Litecoin, Ripple, Ethereum, etc.
Pros and Cons of Fiat
- Centralization. Since fiat does not need to rely on a fixed resource, central banks can manage its supply. It gives them the economic power to handle credit, interest rates, and liquidity.
- Mitigating Recession. Fiat currency can mitigate local recessions and help manage crises by printing or holding them. However, it is not effective on a large scale or in a global recession.
- Relative stability. Unlike gold or cryptocurrencies, whose value fluctuates with the market, the strength of fiat currency tends to remain stable but depends significantly on the power of the respective government.
- Due to the unlimited supply of fiat, the problem of inflation arises. Fixed resource-linked currencies are more stable in the long term because of the limited supply of resources such as gold or silver.
- High taxes depend on the accumulation of wealth and location.
- Impossibility of repayment due to lack of physical commodity collateral.
- The risk of instability depends on the government. When a country is doing well, banks and fiat currency thrive. But when the country is poorly governed or suffers from something, the fiat currency also suffers, hence the residents.
- Slow transactions. Even with internet innovation and faster transactions, wire transfers still have delays, depending on bank schedules also bank charges fees.
- Possibility of counterfeiting. Banknotes and checks are particularly easy targets for counterfeiting.
Pros and Cons of Crypto Assets
Advantages of cryptocurrency:
- Limited issue. Cryptocurrencies are usually created in a set amount, limiting the number of new units and preventing inflation.
- Global access. Being decentralized, cryptocurrencies are globally accessible.
- Transparent transactions. Thanks to an open registry – blockchain – transactions are recorded, confirmed, and cannot be reversed or altered.
- The complexity of taxation.
- Easy transaction. The transfer amount is not limited, and the transaction is almost instantaneous. This factor is often taken into account by users on the Internet, for example, when playing on a casino site.
- Impossibility of counterfeiting. The decentralized nature of crypto tokens implies they cannot be counterfeited and are verified on the blockchain.
- No bank fees. Banks charge various commissions for various reasons: transfer fees, service fees, withdrawal fees, fees for exceeding the credit limit, and international commissions. Cryptocurrency transactions sometimes charge only small fees for network costs.
Disadvantages of cryptocurrency:
- The value of cryptocurrency is directly related to its demand and cannot be controlled.
- Unpopularity. Many people still don’t understand how to use cryptocurrency, and not enough businesses accept cryptocurrency payments.
- Exposure to criminal activities. As cryptocurrencies are still relatively new, their regulation to prevent illegal activity in the crypto market is still evolving. Before many crypto exchanges had customer identification requirements, criminals and fraudsters could easily avoid being detected because transactions could not be traced or linked to a real identity.
- Speculative nature. Cryptocurrencies are not controlled by a central bank or government, making them highly volatile and subject to rapid price fluctuations. Some users like this aspect as it causes high risk and high reward trading possible, while others prefer more stable assets.
- Exposure to market manipulation. Pump-and-dump schemes or insider trading are difficult to monitor because of the confidential nature of cryptocurrency transactions.
Just as fiat took time to stabilize and become the global standard, cryptocurrencies are still in their early days and will likely become more commonplace over the years as people learn to interact with them. Of course, both currencies have advantages and disadvantages, but the incredible variety of possibilities associated with using a decentralized currency system is genuinely inspiring.
The world may not yet be ready for a digital currency revolution, but we can see that it leads to it. Central banks in most countries consider cryptocurrencies as the next step in the money evolution. This means the adoption of cryptocurrencies and a paradigm change await the economy in the near future. It is difficult to pinpoint an exact timeline for when cryptocurrencies and digital asset transactions will become common. However, the technology adoption curve shows that the gap between launch and mass acceptance is getting smaller and smaller. Maybe in ten years, you will send your wallet to the trash and keep all your money safe and sound in a blockchain ledger.