Legal tender, as used by the general public, is a currency issued by a national government and is made legal tender by government decree. The value of legal tender is derived from the owner's belief that the currency will maintain its purchasing power in the future. Some countries or banks that issue legal tender will peg their legal tender to one or more foreign currencies and maintain the exchange rate at a certain level with government foreign exchange reserves. Its value is free floating and relies on the government to control its issuance, so there is basically no limit or regulation on the amount of currency that can be issued.
The differences between bitcoin and fiat currency are described in five key points: decentralization, limited issuance, anonymity, transparency and irreversibility.
1, Decentralization
The most important feature of Bitcoin is that it is decentralized and essentially not controlled by any person or country. The Bitcoin network is maintained by a core group of Bitcoin developers and is run by a global open-source dedicated computer network. In electronic fiat currencies, this is achieved by banks, enabling them to control traditional electronic money systems, whereas with Bitcoin, the integrity of transactions is maintained by a distributed and open-source network belonging to no one. The advantage of its decentralization is that it is not subject to a single country or institution having great influence, but rather that the individual nodes have equal powers and obligations that will not have to be changed because of the needs of national governments for their benefit, such as the limited issue mentioned next.
2,Limited issuance
The financial tsunami of 2008 led to the collapse of the financial system as a direct result of a series of chain reactions caused by the collapse of the US real estate market. This was followed by the bankruptcy of Lehman Brothers, which hit the global economy hard and had a significant impact around the world due to the interconnectedness of the global economy. In order to rescue the sluggish economy, the adoption of loose monetary policy became a common bailout option, but it also resulted in currency devaluation.
This financial crisis exposed the flaws in the traditional financial system, however, as recently as 2008, a mysterious man named Satoshi Nakamoto released the Bitcoin white paper "Bitcoin: A Peer-to-Peer Online Electronic Cash System" in order to avoid another financial tsunami like the one described above. Unlike fiat currencies, bitcoin issuance is controlled by an underlying algorithm that produces new bitcoins every hour, and at a decreasing rate, until the total cap of 21 million is reached in 2140. According to the supply theory of economics, the value of Bitcoin will increase assuming that demand for Bitcoin grows in the future and its supply remains constant.
3, Anonymity
Unlike today's banks, which have access to almost all of a user's personal information, including credit history, residential address and spending habits, bitcoins are not linked to any personally identifiable information, so basically no one else knows who owns their address. However, because of its anonymity, it can be used for drugs, terrorism and illegal and dangerous activities, so most countries have laws that require exchanges to conduct KYC before allowing users to trade, top up and withdraw.
4, Transparency
As long as there are BTC transactions, they will be stored on the blockchain, and because the Bitcoin network is transparent, anyone can tell how much assets are in their wallet address through the blockchain ledger. In addition, everyone can see the progress and information of a particular transaction. If certain addresses have been identified as being used for illegal activities, for example, if KYC authentication reveals that the wallet is being used with criminal intent, the transparency of Bitcoin will allow for an overview of the wallet's asset operations and transfers, etc. While the anonymity of Bitcoin was mentioned earlier, the transparency of its wallet assets and transaction history makes Bitcoin not the ideal currency for criminals, terrorists or money launderers.
5, Irreversibility
Unlike electronic and online fiat currency transactions, Bitcoin transactions are irreversible because the Bitcoin network has no banks, intermediaries or third parties that can perform refund functions. If a transaction is recorded on the Bitcoin network, it is essentially impossible to backtrack the Bitcoin network unless a fork or 51% attack occurs. In other words, once bitcoins are sent to someone else, they cannot be retrieved unless the recipient wants to send them back. This means that no transaction on the Bitcoin network can be tampered with, hence the transaction-is-cleared feature.
