Currency: Understanding Cryptocurrency and Federal Currency

The function of cryptocurrency is to act as a mode through which transactions are carried out using digital currency, and the absence of middlemen like banks or payment processors in the binary data based operating system is evident. With many different kinds of cryptocurrency in circulation all over the globe, it has become a popular choice for investors. Protection is guaranteed by using a complex code or protocol based on mathematical concepts.

Source

Federal Currency primarily utilizes printed notes but has slowly started adopting digital means, and an intermediary that being a bank is required for this. The participation of intermediaries and other elements ensures the stability of national currencies, producing and monitoring it falls under the purview of central authorities. Cryptocurrency cannot be compared favorably with respect to usability in transactional or exchange scenarios when compared with this form of currency.

Meaning
Physical currencies which are released by the government are known as federal currencies. It is common for respective governments to back it. The nature of cryptocurrency is to operate digitally within the context of an independent and centralized network, ensuring security against duplicate transactions through the usage of cryptography. Cryptocurrencies don’t have any physical form and are solely obtained through digital mining.

Issuing medium
The Central bank or any other legitimate institution in the originating state is responsible for controlling both issuance and operation of Federal currencies, but no governing body is responsible for issuing cryptocurrency. Independently operating under a private system.

Intermediaries
Banks play the role of intermediaries in exchanging and transferring federal currency, and digital transactions also require intermediaries like payment processors and banks. Validation and transfer of cryptocurrencies don't require third party involvement.

Medium of Exchange
While federal currency is accepted in both digital and tangible exchanges, cryptocurrencies are solely traded online.

Supply
There is an endless supply of federal currency and there are no limits set for the production of currency by the government which leads to this scenario. Money can be printed depending on the current situation and needs, but no one can say for sure how much money is circulating.

Cryptocurrency's availability is limited in some respects, however, the total number of Bitcoins that will ever be created is restricted to only twenty one million which makes it clearly as the biggest among all cryptocurrencies.

Legality
Each country in the globe has its own set of Federal Currency that is managed and backed by their respective Central Authority & Government, making Federal Currency an accepted medium for transactions. In some nations around the world cryptocurrency trade and exchange are prohibited due to its potential involvement in supporting illicit operations namely terrorism.

Tangibility
Physical exchange is used in federal currencies while cryptocurrencies operate digitally using encrypted codes with no physical embodiment.

Storage
Digital and traditional forms of Federal currency can be securely stored in appropriate formats such as bank accounts or payment platforms, and currencies belong solely to their respective holders and owners. Cryptocurrencies are kept within wallets that hold unique data to verify ownership

Safety
The safety provided by transacting with federal currency cannot be compared to other forms of payment since it's supported by a strong central authority that ensures easy identification and resolution of fraudulent activities. Cryptocurrency transactions carry inherent risk, and anonymous transactions pose a risk and make it unsafe. Also, cryptocurrency functioning doesn't rely on government intervention or assistance; however, the possibility of fraudulent acts and unauthorized access in these transactions cannot be ruled out. Law enforcement agencies face difficulties catching the offenders.

Representation
Cryptocurrencies use a one of a kind computer code that can be public or private to represent themselves while Federal currencies use physical forms of money such as coins and notes.

Volatility
Unlike federal currencies which are centrally regulated making them less vulnerable to market fluctuations cryptocurrency being decentralised remains susceptible.

Transaction Cost
Higher transaction costs are associated with federal currency because of intermediaries, but intermediary free transactions in cryptocurrency come with a significant reduction in cost.

In conclusion
Cryptocurrencies share certain similarities with federal currencies but also differ from them. Despite being utilized in transactions, it's possible to subdivide either of them into lesser units. Both mainly differ in terms of issuance procedures, tangibility levels including storage techniques along with role played by intermediaries.