While some insist Bitcoin is a disruptive currency that will destabilize national currencies and the global economy, others see things differently. As some would say, Bitcoin enjoys a fair share of love and criticism.
Bitcoin primarily started as a decentralized transaction currency, which businesses and individuals would spend on various items or services and transfer funds worldwide, just like fiat money.
On many occasions, Bitcoin shares some characteristics with fiat money and has outperformed the world’s reserve currency, the USD.
Bitcoin and Fiat Money Uses
Both Bitcoin and fiat money primarily serve as transaction currencies and investment assets. However, they work in different ways. Bitcoin is a decentralized currency, not regulated by any government, institution, or individual.
That means users can transact it autonomously, without intermediaries, facilitating prompt, secure, and low-cost payments.
On the other hand, fiat money transactions are subject to government regulations and institutional influences.
All fiat currency transactions must go through intermediaries, which usually impacts higher transaction fees, payment delays, and multiple security risks. Fiat currencies are centralized, and their usage remains subject to political influences.
Its robust real-world uses give it a positive image and a more potent competitive edge than fiat money. Besides, Bitcoin has higher value prospects than fiat money despite its volatility.
Thanks to Bitcoin’s decentralization, many people perceive it as a more reliable payment method and store of value than fiat currencies. It facilitates more financial inclusion, and capital flows worldwide since transactions are not subject to government regulations.
Fiat currencies have been the custodians of financial transactions since the invention of money. Each country has a unique currency, and they also hold different values.
Nevertheless, fiat currencies are accessible in every part of the world. However, their supply and circulation entirely depend on the laws and policies of their respective governments and institutions.
Governments use monetary policies to regulate the circulation of fiat money within and outside of their borders.
For example, businesses and individuals must go through designated financial institutions such as banks and money processors to transact fiat money.
While fiat currencies are financial custodians, their accessibility remains subject to government laws and other influences that favor only the powerful and wealthy people.
Anyone with stable internet connectivity and a smartphone can join the Bitcoin network and transact it worldwide without external interference. While Bitcoin has a lower market cap than fiat currencies, it is more easily accessible than the latter.
Overall, Bitcoin has more real-world use cases, higher-value prospects, and better accessibility than fiat money.
That gives it a more significant potential to outlast fiat currencies, but Bitcoin also faces substantial challenges. It may replace fiat money, but that will take a very long time.