Blockchain and Cryptocurrency Beginner - Similarities and Differences Between Cryptocurrency and Conventional Currencies

Similarities

Both cryptocurrencies and conventional currencies can be used for payments - This is one of the major use cases of any currency as they can be used to send and receive payments for products or services.

Both cryptocurrencies and conventional currencies can increase or decrease in value - Currencies can increase or decrease in value depending on various factors such as sentiments, economic situations, inflation, supply and demand.

Both cryptocurrencies and conventional currencies can be used as a store of value - Currencies can be used as a store of value as there are certain currencies that can hold its value or is more likely to keep increasing in value due to many favorable factors like strong economic power and sentiments.

Both cryptocurrencies and conventional currencies can be exchanged from one currency to another currency - Currencies can be exchanged from one currency to another currency. For conventional currencies, this can be done in the foreign exchange market while for cryptocurrencies, this can be done in the crypto exchanges.

Differences

Cryptocurrency transactions are transparent - This is what sets cryptocurrency apart from the conventional currencies. Since cryptocurrency runs on the blockchain and one of the features of blockchain technology is transparency, it means that all cryptocurrency transactions recorded and stored on the blockchain are transparent and anyone can view the transaction records. While in the conventional currencies, the records of money transactions is private and not transparent for everyone to have access to.

Stored cryptocurrency transactions records cannot be altered or erased - As always, one of the main strengths of a cryptocurrency is that it runs on the blockchain. This makes all transactions impossible to alter as any transactions recorded on the blockchain cannot be altered or erased. While in the conventional currencies, stored transaction records can be altered as the records are stored on physical paper, centralized server, storage device or computer which the information stored can be altered or erased.

Decentralization - This is another differentiating factor of cryptocurrencies compared to the conventional currencies. This basically means that there is no central entity or authority or bank that controls transaction activities. Since one of the characteristics of blockchain is decentralization, it means that there is no central authority or entity that makes decisions and the users makes all the decisions and have full control of what happens in the system. While in the conventional currencies, the banks or central financial institutions make all the decisions and have full control of what happens in the system.

Cost reduction - This is another aspect that differentiates cryptocurrencies to the conventional currencies like paper money. Sending cryptocurrencies from one person to another and from one country to another is very cost effective compared to the conventional currencies. Some cryptocurrencies charge very small transaction fees to send cryptocurrency transactions and some don’t even charge fees at all. This is great as it means that cryptocurrencies can be sent to any parts of the world at a much reduced cost. While in the conventional currencies, it can be very expensive to send currencies to any part of the world or from one country to another. Some financial institutions charge as high as 20% to send money from one country to another. Even though there are other alternatives like paypal, there are the fees attached are much higher compared to sending certain cryptocurrencies.

Speed - This is one of the main benefits of cryptocurrencies and one that really sets it apart from the conventional currencies. Anyone can send cryptocurrencies to any parts of the world faster in less time even as fast as few seconds. Depending on the blockchain which the cryptocurrency runs on, it can take a few second to send cryptocurrency transactions from one country to another and to any parts of the world as there are no third parties involved in the transaction process. While in the conventional currencies, the same cannot be said as it can take days, weeks or even months to send currencies from one country to another and to any part of the world due to the third parties involved in the transaction process and the due process the transactions has to follow when it comes to sending money from one country to another. This adds to the transaction time and makes the whole process very slow.

Uninterrupted payment - Cryptocurrencies live on the blockchain and as always, there is no downtimes on a stable blockchain. Since there is no central server, it is almost impossible for a blockchain to have a downtown since there are a lot of nodes in different parts of the world that runs the blockchain. This makes it possible for anyone to send cryptocurrency transactions from one person to another, anywhere in the world at any time without any interruptions. While in the conventional currencies, payments can be interrupted when sending money from one person bank account to another person bank account. This can be as a result of issues in the server or network problems or failures in the financial institution like the banks.