Key Difference between Cryptocurrency vs Fiat

Fiat money is government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government or central bank that issued it. This means that fiat money lacks intrinsic value, and there are generally more opportunities for bubbles with fiat money due to its unlimited supply. It is usually represented by paper money, although digital payments are on the rise. Fiat currency is centralised, meaning it is controlled by a sole third party- the government. Supply of fiat currency, and in turn, the economy, is controlled by the government by applying policies to change the supply and the price of its fiat currency. One danger of using fiat money is that governments will print too much of it, resulting in hyperinflation and a decrease in the value of the fiat currency you hold. When transactions are made, an intermediary like a bank or payment provider is required to facilitate the process.

Cryptocurrencies are digital assets that function as a medium of exchange. Most cryptocurrencies are also not backed by any physical value, and thus do not have intrinsic value. The value of cryptocurrencies are determined by supply and demand in the market. However, unlike fiat currencies, some cryptocurrencies have a finite amount which prevents the issue of hyperinflation. Bitcoin is one such cryptocurrency, with its finite supply of 21 million. The value of bitcoin is determined by demand and supply. Cryptocurrencies are usually issued by computing, are not thus not controlled by any government, and transactions using cryptocurrencies involve only the sender and the receiver, without any third parties.