In this article, we are going to talk about How Fiat Currency Related To Crypto and UAE’s Role In becoming Crypto Hub.
So let get started!
The history of money and trade is as old as mankind itself. Tracing back to the ancestry of cave-dwelling human beings, the concept of trading through valuables was fundamental back then as well.
People used to trade precious stones or bones to get particular services or goods.
If you are keeping up with cryptocurrency trends globally, you must have heard about the term Fiat money.
For the people of the UAE, this term is relatively new as Crypto has just been authorized for trade by the government.
People in the UAE appear to be keener than ever to buy bitcoin in AED.
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Let’s explain Fiat and Crypto First.
Fiat money is the paper currency money that we all use to purchase goods and services in our everyday life.
Fiat money doesn’t offer any commodity in exchange for its value.
Fiat money is government-issued money that is not backed by a tangible asset like gold or silver but rather by the government that issued it.
Fiat money’s value is determined by the connection between supply and demand and the stability of the issuing government rather than the value of the underlying commodity.
Most current paper currencies, including the US dollar, the euro, and other major global currencies, are fiat currencies.
Cryptocurrency, often known as crypto-currency or Crypto, is any digital or virtual currency that employs encryption to safeguard transactions.
Cryptocurrencies operate without a central issuing or regulating body instead of relying on a decentralized system to track transactions and create new units.
Fiat vs. Crypto: The better option?
Since the day cryptocurrency was introduced into global trade, this debate has been going on.
Today, the world is gradually moving towards cryptocurrency because of certain reasons. Cryptocurrency is globally acceptable and has a firm value no matter where you reside.
On the other hand, fiat money doesn’t act like this.
Government approaches the economy to influence fiat money. Plus, the Fiat is limited to a certain region.
The whole supply of Fiat is influenced by the governments and banks and traceable transaction routes.
With Crypto, you are eligible to trade globally without any conversion restrictions.
Also, the supply of Fiat is controlled by banks and the government, and they can cause hyperinflation by printing more money, but in the case of Crypto, it is not possible.
First of all, its supply is limited; it is decentralized, giving it a plus point against inflation.
Working dynamics of Fiat Currency and Crypto
The whole working concept behind Fiat money is quite simple. The note you have in your hand determines the value of goods or services you can buy with it.
But the trade through Fiat currency is restricted to a particular region only. Today, most of the fiat currencies around the globe are off the commodity offering hook.
The Bitcoin network is built on the blockchain and is made up of transactions linked together in a chain of blocks.
Each block carries information about preceding blocks, which is how the whole system is linked into a network, and data integrity is maintained inside it.
The network’s data concerning transactions and activity is anonymized, ensuring that bitcoin holders remain anonymous.
The future of Fiat currency and Crypto
Imagine a huge balloon. A balloon that is constantly getting bigger and bigger because governments around the globe are inflating it by printing more and more money.
One day or the other, the balloon will finally burst, which will disrupt the whole global economic system. This is the projection for Fiat money shortly.
To prevent such a level of devaluation, governments around the globe are now accepting crypto-based trade.
A major reason behind this is the volatile nature of Crypto.
AFTER BRAINSTORMING A LOT ON THIS ISSUE, the UAE government has finally made a positive decision.
It is better to gradually switch to digital assets, which can retain their value in the long run.
Throughout history, change has been an evident part of human civilization. The fiat money concept replaced the barter system.
Now, cryptocurrencies are in charge of changing the global trade dynamics, and the UAE plays a crucial role in this change.