CryptoCurrency vs Regular Currency | Motilal Oswal

How is cryptocurrency different from regular currency

As the last few years have rolled by, the hot topic of conversation and speculation in the media, on online forums, at social gatherings, and dinner tables, across the world, has revolved around the tantalizing prospect of cryptocurrencies – with swarms of people trying to gauge the markets, and predict a rise or fall in their fortunes. However, the intricacies of these markets still seem to elude many, and through this piece, we aim to shed some light on the same.  

  • What is CryptoCurrency?

CryptoCurrencies are a form of digital payment systems, secured by cryptography, that run on a peer-to-peer system, enabling seamless transactions the world over. Each unit of such CryptoCurrencies are procured through a process commonly referred to as ‘mining’ and are electronically encrypted and mined using computers. The countless forms of CryptoCurrencies (Bitcoin, Ethereum, Litecoin, Ripple, and so on) run on a public ledger called 'Blockchain' and are not regulated by central authorities, or backed by governments, driving up their volatility and speculative nature. 

  • What is Regular Currency?

Regular currency is the standard, government-issued currency, often not backed by physical commodities like gold and silver. This form of the currency tends to derive its value and worth from the market forces of supply and demand, and the stability of the issuing government, often giving central banks of the respective countries greater control over the economy, in addition to aiding in the setting of monetary policy. Regular currency is a peg of a nation’s economic viability – accounting for a value of storage, ensuring a numerical count, and facilitating a means of exchange.

  • What is the difference between CryptoCurrency and Regular Currency?

The difference between CryptoCurrency and Regular Currency can be briefly elucidated through the following table:

 

Regular Currency 

CryptoCurrency

Issued by

Central banks

Independent

Intermediaries

Required to make a transfer

Not required to make a transfer

Legality

Universal legality

Not Universally legal

Supply

Unlimited

Limited

Exchange

Digital or physical 

Digital only

Tangibility

Tangible

Intangible

Storage

Bank accounts

Digital wallets


Conclusion

Having now understood the basic distinction between CryptoCurrencies and Regular Currencies, it is of vital significance to point out that the Crypto market remains in its nascent stage, with investors and policy analysts alike still wrapping their heads around the fluctuations that the market routinely throws up. We, on our part, would urge and advise investors not to invest in these currencies until and unless all your essential financial requirements and investments, including long-term investments (equity and financial derivatives, mutual funds), emergency funds, and insurances are in place. Once all these basic financial holdings are in place, any surplus funds you possess can be used to venture into the Crypto market, but not without immense caution and scrutiny. To ensure a seamless integration of all your financial needs, before venturing into the Crypto market, do get in touch with us at Motilal Oswal today – a one-stop solution for a more secure financial future.

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