What are the key differences between cryptocurrencies and traditional currencies?

Cryptocurrencies and traditional currencies differ fundamentally in several key aspects. Traditional currencies, often called fiat money, are government-issued legal tender backed by national governments and central banks. These currencies, such as the Australian dollar, are regulated by monetary authorities, which control their supply, interest rates, and overall monetary policy. They are widely accepted for goods and services, supported by physical infrastructure such as banks and cash systems.

On the other hand, cryptocurrencies are purely digital assets that operate on decentralized blockchain technology. Unlike fiat money, cryptocurrencies are not controlled or issued by any central authority. Their supply is typically governed by algorithmic protocols coded into the blockchain. Transactions involving cryptocurrencies are recorded on distributed ledgers maintained by a network of participants, providing transparency and security without the need for intermediaries.