Important Crypto Terms, Meanings, & Differences

Welcome to another episode of the Crypto for Newbies series. Previously, we explored the trajectory of Bitcoin from inception to date. In this episode, we’ll look at the meanings of some crypto terms and their differences.  

So, we know that fiat money is the regular currency you store in the bank, but what other ways is it different from cryptocurrency? Well, you’re about to find out.

How is crypto different from fiat money? 

Cryptocurrency, unlike fiat money, is not governed by governments or supported by them. In addition, cryptocurrency is far more volatile than fiat money.  

Unlike fiat money, cryptocurrencies do not require an intermediary (like a bank) to validate a transaction. Blockchain technology is used to verify crypto transactions, which means that all trading operations are permanently recorded, boosting the security of any exchange.  

In spite of these differences, there are a few similarities between fiat and crypto. 

For starters, both of these types of currency get much of their value from their widespread adoption around the world. More acceptability equals more trustworthiness.  

Digital currency vs cryptocurrency

Have you ever wondered what the differences are between cryptocurrencies and digital currency? Here are a few important differences: 

1. Governing authority 

Official digital currencies are issued by a central bank, which is in charge of the country’s banking system. It works just like ordinary fiat currency. However, there is no issuing authority in the case of cryptocurrencies.  

Learn more: Digital currencies – Wikipedia 

2. The underlying tech 

With digital currencies, there is little encryption and no additional cybersecurity safeguards. Digital currencies can be stored and used by anyone having a conventional online bank account. It is a form of electronic cash. Most cryptocurrencies, however, employ blockchain as the underlying technology, and they are typically maintained in ‘wallets’ with high levels of cyber security. 

3. Fluctuation and stability 

While digital currencies have relatively stable, are simple to hold, and can be used on a worldwide scale, cryptocurrencies are quite volatile. The price of a crypto coin might fluctuate by as much as 50% to 70% in a single day. 

4. Transparency 

Transparency is one major area where cryptos excel. The complete history of transactions between two parties is visible and undeniable. In the case of a digital currency issued by a central bank, however, the centralized issuing body selects how much information it wishes to divulge.
 

The information provided in this article is intended for learning purposes and should not be regarded as financial advice. Naija.FM shall not be held accountable for any losses incurred from trades or investments gone wrong. We make no guarantees or assurances about the accuracy or timeliness of the information provided here. As each individual’s circumstances are unique, you should always consult your financial advisor for professional assistance before making a financial decision.