What is Cryptocurrency? Difference Between Crypto & Fiat Currency – How to Measure Crypto Value?

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Last Updated: February 27, 2023

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Cryptocurrency is the most popular and widely usable form of digital money which is used by 420 million people worldwide. Well, there are multiple types of these cryptocurrencies available from which the most popular are Bitcoin, Ethereum, Litecoin, Binance coin, and USD coin. As a record more than $7 trillion in bitcoins has been transferred since 2007 which is the highest record compared to all other types of cryptocurrency. 

The crypto-system helps you in outlining the existing cryptocurrency units and their ownership. Not only but also, will define the circumstance origin of newly created crypto units and their owners. This form of digital currency has been spread globally. So, before all the forms of currencies such as euros, dollars, pounds, francs, and other real currencies will convert into cryptocurrency let’s learn it. 

What is Cryptocurrency? What are its fundamentals?

Cryptocurrency, crypto-currency, or crypto is a digital form of currency that has been devised having the purpose of the medium of exchange through computer networks. It’s a decentralized form not maintained under any central authority such as the government & banks. This alternative form of payment doesn’t require traditional intermediaries while transforming funds between two parties since it desists heed of central management.  

The record of the cryptocurrency transaction is managed by blockchain technology cooperatively across all networks of connected computers. A wide range of people uses this decentralized medium of money for verifying that the parties of the transaction have money about which they are asserting.  

Just because cryptocurrencies are volatiles and intangible assets, any bank system is not required here to regulate them. On the condition of intangible assets, these electronic currencies have insecurities of online stolen. In simple language, sometimes these cryptocurrencies can be hacked like other intangible technology assets. 

Furthermore, suppose you have lost your mobile phone or another device as well as you have no access to any more of your device then you can lose your cryptocurrency.  Across the board, you can lose your entire investment in just seconds. For saving yourself from the approach, you need to have a backup of your data or need to choose a trustworthy wallet. 

What is a Digital Wallet?

In terms of cryptocurrencies, the wallet works as a key address that gives you the authority to spend and receive cryptocurrency privately or publicly. Basically, the wallet is used to keep your crypto password or keys safe and allow you to use them over time with a secure process. These wallets allow you to write your crypto records in a public ledger by spending the associated cryptocurrency.

Digital Wallet and types

Types of Digital Wallets

Mainly there are 5 kinds of wallets used for cryptocurrency transactions as follows:

  1. Mobile Wallet

Of course, the wallet that you can use on your mobile device as an app for storing your keys and running them well while performing transactions. Mobile wallets are completely able to make your trade transactions and also will operate in buying crypto with phones. The drawback of using mobile wallets are hacking, fraud, malware, and loss of device data.  

  1. Desktop wallet

Here the wallet will keep your crypto keys safe using the system’s hard drive and obviously are much more secure than a mobile or web wallet. Since the desktop data does not support the third part software for storing your crypto keys. One of the downsides of using a desktop wallet is that it needs a large space disk and a fast internet connection. 

  1. Web Wallet

In this kind of wallet, your crypto keys will be safe from a third party since it does store your private keys on the server which is online 24/7. For a convenient experience, these wallets allow you to access your funds as prolonged as you can connect to the internet. On the condition of using this wallet, you have to take a risk of giving your private to someone else (a third party) that can be hacked too. 

  1. Hardware Wallet

These wallets are more secure than the ones mentioned previously and look like a USB key. Its works like biometric locks. In another language, you can unlock these locks using an aad-haar holder but just for a temporary period. Here you need to connect your system with the Hardware wallet for making the transaction for your cryptocurrency. To ensure maximum security for your digital assets, it is recommended to use the best hardware wallet available on the market

  1. Physical Media

You can count this wallet in the safest form of the wallet. Because this wallet does not store your keys online mode that’s why physical media wallet is hard to hack. For making crypto transactions this wallet prints your physical private key as a QR code and then scans them into the hot wallet for making transactions.  

Difference Between Cryptocurrency and Fiat Currency

Cryptocurrency vs Fiat Currency
CryptocurrencyFiat Currency
DefinitionA digital asset designed to function as a medium of exchange, secured by cryptography and decentralized technology.A government-issued currency that is not backed by a physical commodity such as gold.
CentralizationDecentralized – operates on a peer-to-peer network with no central authority.Centralized – typically controlled by a central bank or government.
Transaction speedTransactions can be completed quickly and securely.Transactions may take longer to process and may require third-party verification.
AnonymityTransactions are generally anonymous or pseudonymous, protecting user privacy.Transactions are usually linked to real-world identities, reducing anonymity.
RegulationGenerally unregulated, with little oversight from government or financial institutions.Regulated by governments and financial institutions, with strict compliance requirements.
VolatilityCan be highly volatile, with rapid fluctuations in value.Generally more stable, with smaller fluctuations in value.
SecurityUses strong cryptography to secure transactions and protect against fraud.Relies on security measures such as physical bank vaults and anti-counterfeiting measures.
AccessibilityAnyone with an internet connection and a digital wallet can participate.Access is limited to those with bank accounts or credit cards.
InflationNew units are created through a process called mining, with a fixed maximum number of units available.New units can be created at the discretion of the central bank, potentially leading to inflation.

Overall, cryptocurrency and fiat currency represent two very different approaches to finance and commerce. While fiat currency is the more established and traditional option, cryptocurrency offers users a decentralized, secure, and efficient way to transfer value across the world. However, it is important to carefully consider the risks and challenges associated with both options before investing or using them.

How Cryptocurrency value is measured?

The value of cryptocurrency is measured by several different factors, including supply and demand, adoption and usage, technology and innovation, and market sentiment and speculation.

One of the most significant factors in determining the value of cryptocurrency is supply and demand. The supply of a cryptocurrency refers to the total number of units that exist, while demand refers to the willingness of buyers to purchase those units. If there is a high demand for a particular cryptocurrency and the supply is limited, the price of that cryptocurrency will generally rise. Conversely, if the demand for a cryptocurrency is low or the supply is high, the price will generally fall.

Adoption and usage are also important factors in determining the value of cryptocurrency. As more people begin to adopt and use a particular cryptocurrency, its value is likely to increase. This is because increased usage indicates greater demand, which in turn drives up the price. Additionally, increased adoption can lead to greater network effects, meaning that as more people use the cryptocurrency, its usefulness, and value are likely to increase.

Technology and innovation are also important factors in determining the value of cryptocurrency. The underlying technology behind a particular cryptocurrency can affect its security, scalability, and usability, which in turn can impact its value. Additionally, innovation in the form of new features or functionalities can help to increase the value of a cryptocurrency.

Market sentiment and speculation can also play a significant role in determining the value of cryptocurrency. Like any asset, the price of cryptocurrency is subject to speculation and investor sentiment. If investors are optimistic about the future of a particular cryptocurrency, they may be more willing to invest in it, driving up the price. Conversely, if investors are pessimistic about a cryptocurrency, they may be less likely to invest, leading to a decline in price.

Overall, the value of cryptocurrency is determined by a complex interplay of factors, including supply and demand, adoption and usage, technology and innovation, and market sentiment and speculation. Understanding these factors can help investors make informed decisions about when to buy and sell cryptocurrency, and how to manage their investments over time.


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