These days, security is a hot topic – whether it is the security of our borders, the security of our pensions, or the security of our data.
While we can keep our sensitive information well-protected using various simple but effective methods – customizing your privacy settings, installing a good VPN, and keeping personal data off data broker sites – when it comes to the issue of currency, opinion is often divided.
Growing numbers of people are turning to cryptocurrency across the globe, not only for investment but to use in place of fiat currency to pay for everything from clothing bought online to virtual casino deposits.
But is cryptocurrency more secure than fiat money? Let’s take a look.
Crypto vs. Fiat: the big differences
The main difference between a cryptocurrency and a fiat currency is where they derive their value from. Fiat money, also known as ‘legal tender, is given value by the governments and the banks that control it.
On the other hand, cryptocurrency gains its value from the native blockchain it hails from and has no government-ordained fiscal policy – only the policy encoded in the protocol.
This means that while governments can alter the value of fiat currencies by either ordering the printing of more money or changing interest rates, the value of cryptocurrencies can only be altered by the prices on the crypto market.
This leads us to another crucial difference between cryptocurrency and fiat currencies; the former is decentralized, meaning that transactions can be made via the blockchain without banks, credit cards, or even payment apps such as PayPal. Fiat currency, however, usually requires the presence of an intermediary of some sort, whether it’s a bank, Visa, or Western Union.
A question of security
When it comes to the issue of security, cryptocurrencies are widely considered to be more secure than fiat money. This is because cryptocurrencies are much harder to counterfeit and are created using blockchain technology and stored in specially designed ‘crypto wallets,’ which often require a unique key to open; they are much harder to hack than a traditional bank account.
In addition, cryptocurrencies offer their users more control from a financial standpoint, as they are decentralized and not subject to the vagaries of banks and governments.
That being said, when you invest in cryptocurrencies, you still cannot guarantee the absolute security of your new Bitcoins, as has been made clear in recent months by the high-profile hacking of crypto exchanges such as Binance.
A shocking $1.4 billion worth of cryptocurrency has been stolen in 2022 alone, using so-called ‘bridge hacks,’ which target the crypto bridges that link different blockchain networks.
These widely publicized attacks could be highly off-putting to potential crypto investors and reveal the extent of the work that still needs to be done by blockchain engineers when it comes to creating a secure environment for blockchain networks.
In conclusion
As you can see, while cryptocurrencies have undeniable advantages, when it comes to security, in some ways, they are no more secure than fiat currency – and they are also much less stable. As a result, if you are hoping to invest in crypto, it’s probably best to tread carefully and educate yourself about the risks and benefits.
