Cryptocurrencies don’t need official backing, whereas fiat currencies must, which is the key distinction between them and cryptocurrencies.
Blockchain, a cryptographic computer networking technology, is used to construct the majority of cryptocurrencies, allowing them to circulate without the need for a centralized organization like the Federal Reserve.
Many cryptocurrency proponents contend that “decentralization,” or the control of currencies by users as opposed to centralized authorities, will lead to more effective and less corrupt monetary systems.
“A “fiat” is a formal directive or order. Consequently, you may say that a currency is a fiat currency if it is created by a government decree.”
Five unarguable reasons why cryptocurrency should replace fiat currency
1. Unfair value capture: These intermediaries collect billions of dollars in wealth creation (PayPal market valuation is ~$130B), yet transmit essentially nothing onto their clients – the common people on the ground, whose money powers a major share of the global economy. People are lagging behind in numbers.
2. Fees: Large fees are charged by businesses and banks to facilitate transactions. The people with lower incomes and the fewest alternatives are frequently disproportionately affected by these levies.
3. Censorship: It is possible for a trusted intermediary to impose limits on the movement of your money if it determines that you shouldn’t be allowed to do so.
4. Permissioned: The trusted intermediary acts as a gatekeeper who has the authority to arbitrarily bar anyone from joining the network.
5. Pseudonymous: These strong gatekeepers can unintentionally reveal — or pressure you to share — more financial information about yourself than you may desire at a time when the issue of privacy is becoming more urgent.
By adopting a distributed record, Bitcoin was able to accomplish such historic feat. The Bitcoin record is kept by a distributed community of “validators,” who have access to and update this public ledger, unlike the present financial system, which depends on the traditional central record of truth.