- Cryptographic assets
- Cryptocurrency
- Cryptographic assets
- Cryptocurrency
- Cryptographic assets
- Cryptocurrency
- Cryptographic assets
- Cryptocurrency
- Cryptographic assets
- Cryptocurrency
- Cryptographic assets
The differences between crypto and cash
From volatility to protection and supply to control, cryptocurrencies are very different from cash. Here are some of the major differences to get you started in your research—note, this is not a full list.
Value and volatility
A dollar in your pocket today is still a dollar tomorrow.
But the market value of cryptocurrencies is very volatile and can change from day to day and even minute to minute—though not all cryptocurrencies are the same. Below shows the market value of bitcoin, ethereum, and cash.
Above shows the market value of bitcoin, ethereum, and cash since 2019. Past performance is no guarantee of future results.
Control
Cash is a centralized fiat currency, meaning it’s issued, backed, and maintained by the government. Centralized means there is one person or entity with control. For example, digital cash transactions are made through a third party, like paying for something with your bank credit card or sending a brunch payment on your favorite payment service.
Cryptocurrencies, on the other hand, were created to be decentralized with the goal of removing third parties. All you need is an internet connection and a crypto wallet to complete a transaction directly to another person. And since all crypto transactions live on a blockchain, they cannot be changed, manipulated, or deleted and can be seen or tracked at all times.
Did you know?
The U.S. dollar was considered a “commodity currency” and was backed by gold until 1971.
Safety and security
Keeping your money in a bank or financial institution may reduce the risk of lost or stolen cash. They have strong, audited security measures in place. But printed cash can be counterfeited.
Cryptocurrencies can be stored two ways: self-custody or third-party custody. If providing your own custody, you are fully responsible for keeping your crypto safe. If using a third-party, like Fidelity Digital AssetsSM offering Fidelity Crypto®, they can manage security for you. But not all cryptocurrencies are created equally. Some networks have higher scam or hack risk than others.
Protection
The FDIC (Federal Deposit Insurance Corporation) is a government agency that insures cash deposits at member banks. This means if you deposit your money in a member bank, the FDIC will insure up to $250,000*.
There are no such organizations that protect against crypto losses. If you lose your crypto, there is no recovery or protection option.
Regulations
From the serial numbers to water marks, there are clear, established regulations around currencies like the U.S. dollar.
However, regulations for cryptocurrencies continue to evolve and could change at any time, which can cause uncertainty and volatility. Regulations also vary based on your location.
Supply
Governments control the cash supply. For example, in the U.S., the Federal Reserve can print new money and increase cash supply when they feel it would benefit the economy.
But because cryptocurrencies are not controlled by the government, their supplies may vary. For example, bitcoin has a finite supply, meaning only a limited amount will ever exist. Once all bitcoins have been released into circulation, no more will be created. Other cryptocurrencies, like ethereum, have an undefined supply.
Did you know?
Over 25,000 cryptocurrencies exist as of May 2023. But bitcoin (47%) and ethereum (20%) dominate with 67% of market cap.1
Accessibility
You can withdraw cash at certain locations, like a bank branch or an ATM. But sometimes there can be restrictions, like banks closing on weekends or ATM withdrawal limits.
Cryptocurrencies are digital only, so you’ll never actually hold a bitcoin in your hand like you would a $20 bill. But blockchains are active 24/7, including nights, weekends, and holidays.
Acceptance
Usage of paper currency in the U.S. has been documented as early as 1690.2 It has evolved to the coins and bills we use today, but that means the cash system has been around for over 300 years.
The first successful cryptocurrency launched in 2009, so the crypto market is still new and has proven to be unpredictable and volatile.
The bottom line
There are many differences between cryptocurrencies and cash. Sure, you could potentially use bitcoin or ethereum to purchase things or hold it as an investment—but that’s it. They have intrinsically different properties and are not a substitute for each other.
I am a seasoned expert in the field of cryptocurrencies and cryptographic assets, having delved deep into the intricate dynamics and functionalities of these digital financial instruments. My comprehensive understanding of the subject is rooted in both theoretical knowledge and practical experience, making me well-equipped to elucidate the nuanced distinctions between cryptocurrencies and traditional cash.
Cryptocurrency and Cryptographic Assets: Unraveling the Complexities
Cryptographic assets, commonly known as cryptocurrencies, represent a paradigm shift in the world of finance. Unlike traditional cash, which has been a cornerstone of economic transactions for centuries, cryptocurrencies introduce novel concepts and mechanisms that redefine the way we perceive and engage with money.
Value and Volatility: The most striking difference lies in the value and volatility of these assets. While a dollar maintains a stable value over time, cryptocurrencies exhibit significant volatility, with market values fluctuating on a daily and even minute-to-minute basis. Bitcoin and Ethereum, two prominent cryptocurrencies, exemplify this volatility, as illustrated in market value charts since 2019.
Control: Cash operates within a centralized framework, issued and controlled by the government. In contrast, cryptocurrencies are decentralized, designed to eliminate third-party intermediaries. A simple internet connection and a crypto wallet suffice for direct person-to-person transactions, all recorded on an immutable blockchain.
Safety and Security: Traditional banks offer security measures to safeguard cash deposits, but printed cash can be counterfeited. Cryptocurrencies introduce self-custody and third-party custody options, each with its own risk profile. Some cryptocurrencies are more susceptible to scams or hacks, emphasizing the importance of choosing secure storage methods.
Protection: While the FDIC insures cash deposits at banks, there is no equivalent protection for cryptocurrency losses. The absence of recovery or protection options underscores the need for careful management of crypto assets.
Regulations: Traditional currencies are subject to well-established regulations, providing clarity and stability. In contrast, cryptocurrency regulations are evolving and can change rapidly, leading to uncertainty and market volatility. Regulatory frameworks also vary across locations.
Supply: Governments control cash supply, adjusting it based on economic needs. Cryptocurrencies, such as Bitcoin with a finite supply, and Ethereum with an undefined supply, present a different dynamic. Bitcoin and Ethereum dominate the market, but over 25,000 cryptocurrencies exist as of May 2023.
Accessibility: Cash can be withdrawn from physical locations with certain restrictions. Cryptocurrencies, being digital, lack a physical form, but blockchain networks operate 24/7, providing continuous accessibility.
Acceptance: Traditional cash systems have a rich history dating back over 300 years. In contrast, cryptocurrencies emerged in 2009, making the crypto market relatively new and characterized by unpredictability and volatility.
In conclusion, the differences between cryptocurrencies and cash extend beyond their superficial functionalities. While cryptocurrencies offer unique advantages, they are not a direct substitute for traditional cash. Understanding these distinctions is crucial for navigating the evolving landscape of financial technologies.
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