Have you ever wondered how fiat currencies and cryptocurrencies compare? Our crypto vs. fiat blog post outlines five reasons why cryptocurrencies are beginning to redefine the future of global finance.
Cryptocurrencies are capable of supporting much lower transaction costs than fiat currencies. Many public blockchains charge only the equivalent of a few cents, regardless of whether a user wants to send a couple of dollars or millions of dollars of crypto. Litecoin, for example, has an average transaction fee of just $0.025 and Dash is even less at around $0.0094. Blockchains like Bitcoin and Ethereum do have higher fees on average, but solutions exist on both networks for more scalable transactions. Ethereum 2.0 upgrades promise to offer a substantial improvement that will benefit users and developers of the Ethereum blockchain.
Crypto never sleeps. Want to send Bitcoin from your wallet to a friend’s wallet? This can be done at any time, including weekends, even if that friend lives halfway around the world. Settlement happens in minutes or less. Fiat, in contrast, may take a few business days. Another common pain point with fiat is the need to convert them depending on the country or region of a person’s bank. For instance, let’s say a person living in the US wants to make a payment to someone in France. This requires a conversion from USD to EUR. Then, the person living in France might want to pay someone living in India. This requires a conversion from EUR to INR. Each of these steps includes a foreign exchange (forex) fee, which is much more costly than sending cryptocurrency.
The token economy is being built and with it comes a new generation of the internet. All sorts of applications, from lending and borrowing platforms like Abra to NFT marketplaces to new social media platforms are utilizing blockchain technology. This new generation is often called “Web 3.0” and is rapidly emerging to change the global economy. At its core, blockchain is much more than the technology that powers crypto payments. It is the leading technology behind data innovation. The movement towards Web 3.0 doesn’t stop at crypto. Web 3.0 is creating new opportunities that would not be possible otherwise. Everything from art collecting to personal finance is realizing the benefits.
Also outlined in crypto platforms vs. fiat banks, inflation is an issue that impacts just about every fiat currency. As more fiat is printed, the existing monetary supply is theoretically worth less – meaning a fiat currency (i.e. USD) has less purchasing power over time. Cryptocurrencies are generally more finite, although some do have higher issuance rates than others.
The best example of a cryptocurrency with a limited supply is Bitcoin. Well over 18.8 million BTC is already in circulation, and 21 million BTC is the maximum amount that will ever exist. That means 90% of BTC has already been created. Scarcity along with anticipation that BTC will become more popular over time implies that the value of a single Bitcoin should increase in the long-term. For this reason, Bitcoin is similar to commodities like gold. The biggest advantage is that Bitcoin is easier to move around since it relies upon a digital network for distribution rather than physical storage and transportation. Michael Saylor, a well-known proponent of Bitcoin, says Bitcoin is akin to “digital gold” or “digital real estate”.
Easy To Buy, Sell, and HODL
When Bitcoin was created in 2009, it was unknown by almost everyone. Even those that did know about Bitcoin recognized its main limitation was accessibility. Early crypto wallet software was rudimentary, and the first crypto exchanges were considered insecure. Only decade or so later, and the crypto market is vastly different. Now there are numerous ways and platforms that people can choose from to buy crypto with fiat.
Today, Abra as well as many other platforms have transformed the crypto industry. It’s easy to wire or deposit fiat to an account to get started in crypto. Likewise, it’s effortless to sell crypto and send fiat to a bank. Because most regions of the world having multiple crypto platforms to choose from, participating in crypto markets has arguably become even easier than setting up a bank account or buying stocks. Perhaps even more important is being able to HODL crypto by storing it in a digital wallet or put your crypto to work with programs such as Abra Borrow and Abra Earn.
Crypto Vs. Fiat Summary
Blockchain combined with crypto payments is changing the world in so many ways. The fiat market cap is still much larger than the crypto total market cap, but that might not be true forever. The five reasons listed above are crucial factors for the swift adoption of cryptocurrencies and expansion of the global crypto ecosystem. The benefits of cryptocurrencies will only become more apparent in the years to come.