Cryptocurrency is a relatively new type of money that works in a completely different way than the traditional currencies we all use every day. The most fundamental difference is that there are no physical cryptocurrency coins, as it is completely virtual.

The display and creation methods are also unique. Rather than being generated by a central bank or government like the US dollar, euro, Indian rupee, or other fiat currencies, new cryptocurrency units are circulated through a technological process that typically involves volunteers from all over the world on their computers. .

This is why cryptocurrencies are often called “decentralized”. Cryptocurrencies are typically not controlled or operated by a single company in a single country. It takes an entire network of volunteers around the world to secure and verify cryptocurrency transactions.

However, virtual currencies differ from regular currencies not only in their digital nature and method of issuance. There are other differences as well.

Regulation

The world’s financial system has been based on a variety of fiat currencies for centuries, and most countries have sophisticated laws and best practices regulating their use. However, cryptocurrencies are a largely unregulated market, and even if there is regulation, it may vary from jurisdiction to jurisdiction.

Speed ​​and cost

Sending and processing cross-border transactions using cryptocurrencies is much faster than older banking systems. Instead of taking several business days, transactions can be executed within minutes and often at a fraction of the cost compared to using fiat currency.

Supply

Fiat currency has an unlimited supply. This means that in times of financial crisis, governments and central banks are free to print new money. However, cryptocurrencies typically have a predictable supply determined by algorithms. Many cryptocurrencies are coded to include supply limits (although some do not).

For example, Bitcoin, the world’s first cryptocurrency and the largest by market capitalization, has a supply of up to 21 million tokens, which are released at a constant and predictable pace. This means that once the number of Bitcoins in circulation reaches 21 million, the protocol will no longer place new coins into circulation.

Immutable

Unlike fiat currency transactions, all completed cryptocurrency transactions are permanent and final. It is virtually impossible to undo a cryptocurrency transaction once it is added to the ledger.