Cryptocurrency & Fiat Currency
Author
Prinsloo Dube
Date Published
Fiat Currency
Is a legal tender that is backed by the sovereign government state that issues it. The Australian dollar and U.S. dollar is fiat money, as are many other major world currencies. This differs from money whose value is underpinned by some physical good such as gold or silver (commodity money).
Cryptocurrency
A digital currency in which mathematical encryption techniques and network consensus protocols are used to regulate the generation of units of currency and verify transactions (i.e. the transfer of funds), operating independently of a central bank. It can be used as a form of P2P digital money, purely relying on the blockchain ledger and verification through encryption algorithms, rather than a centrally controlled entity like a central bank.
Blockchain is a software innovation for establishing digital trust between users facilitating transactions of value, over a network.
“Smart Contracts” are computer protocols that facilitate, verify, or enforce the performance of a contract making a contractual clause unnecessary.