By Nathan Ferguson
Despite the extraordinary growth in popularity and use of cryptocurrencies and crypto-based wallets, there is quite a significant segment of individuals who are still not quite familiar with the concept of crypto and blockchain technology, however since the crypto space is open for individuals to explore and learn, there are several tools that can be utilized to go big. The fiat wallet is a part of those set of tools.
Just like crypto wallets, traditional currency supported fiat wallets have seen a major rise in the financial industry in the past few years. Many new and unique payment services have launched their own wallet services, providing trivial ways for people to perform international transactions without having to go through the troubles of an established bank, which often has a set of requirements that are not achievable my many, including young teens looking to earn.
In this article, you the reader will gain knowledge about the existence of fiat wallets and how they stack up against the financial space and how you can acquire one for yourself. The working of fiat wallets similarly also provide knowledge about how crypto wallets work, making it easier for you to manage your precious crypto assets in the future, if you do decide to invest into them.
Let’s now describe what Fiat wallets are.
Defining a Fiat Wallet
A fiat wallet is a digital wallet that you can setup and use to store your country’s traditional fiat currency. As an example, if you live in the country of Japan, then the fiat currency will be the Japanese Yen. Fiat currencies are the currencies that are provided and directly supported by a country’s central bank, mainly used by people daily for performing transactions, both local and online.
These fiat wallets in general, allow you the user to store and transfer traditional currency using digital means. Not only that fiat wallets can also be used to buy anything online, if both the store and the wallet have matched payment gateways.
Several different cryptocurrency exchanges also provide the ability for their user to obtain a wallet, since it becomes easy for the users to easily buy cryptocurrencies if they need to. There are also standard fiat wallets, provided by local banks, however most of them do not provide the ability for users to buy cryptocurrencies.
Example if an individual would like to deposit some capital into their crypto exchange account directly without using a fiat cryptocurrency wallet, then there is no telling how much time the local bank will take to perform that action. But if that individual has a fiat wallet, then he/she can easily use the digital wallet to instantly buy any desired cryptocurrency based on interest.
Additionally, this huge delay from a direct bank deposit can be disadvantageous, because suppose due to the cryptocurrency market volatility, the price of a crypto falls drastically, instead of taking advantage of the situation and instantly acquiring that crypto, the individual would have to wait several days for the direct deposit to process. Crypto assets can sometimes recover very quickly, so transaction speed is a big factor surrounding success in the crypto space.
Working of a Fiat Wallet
As mentioned before, a fiat wallet works very similar to a cryptocurrency wallet, as both types of wallets are used to store some form of capital from the user. However, in the case of a fiat wallet, instead of relying on a blockchain or cryptocurrencies, the fiat wallet just stores your country’s traditional fiat currency, just like what a bank account would do.
Cryptocurrency exchanges also provide fiat wallets in addition to cryptocurrency wallets, providing their users with a sort of flexibility in choosing which type of wallet they would prefer to use. Non-crypto savvy would generally prefer to work with standard fiat currencies, but crypto enthusiasts would obviously go for versatile cryptocurrency wallets to trade around with their cryptocurrency assets.
The fiat wallet also provides a smooth payment pathway for instant transfers between both fiat currencies and cryptocurrencies, without having the need to contact banks. Not only does this enable instant transactions, but also provide an easy pathway for users to transfer funds as they please.
Fiat wallets are generally very easy to manage and operate and are not considered to be complex in any case. Traditional banks have also started to create their own online banking services, providing their users with a similar functionality of fiat wallets using their own personal applications on both PC and mobile platforms. Fiat wallets are an impressive and vital utility for those who looking to seek easier payment gateways.
Setting up a Fiat Wallet
Getting started with a fiat wallet is quite a trivial task and only takes a couple of minutes to set up. Below mentioned are some steps that you need to follow that will provide you with a smooth pathway towards a fiat wallet.
Firstly, do some research online and find a trusted fiat wallet issuer. There are many guides and ranking sites which highlight the pros and cons of different fiat wallet providers, so it is important to select the one which you can trust your previous investment into.
Once you have selected an issuer, go to their website and create an official account. For wallet creation, most of the issuers will ask some personal information for example, name, email, phone and address etc.
After you have fully registered an account with the wallet issue, then you will have to transfer some funds into it for usage. Funds can be transferred directly using a bank deposit or using a credit or a debit card for quicker service.
Congratulations! Now that you have successfully created a fiat wallet, you can now utilize the funds deposited to either store them, transfer them to others, receive incoming funds or perform transactions using your local currency.
Using a Fiat Wallet
The usage of a fiat wallet differs from a standard banking method, however as previously mentioned, its function is like a cryptocurrency wallet, but focused on the fiat currency it supports. The primary use case of a fiat wallet is to perform transactions or purchase specific amounts of cryptocurrencies or hold them in case of a crypto sale.
Being like crypto wallets, fiat wallets are even more trivial to use than cryptocurrency wallets. Cryptocurrency wallets generally involve the usage of QR codes and lengthy strings of characters (also called addresses), fiat wallets only choose functions and execute them.
Using a fiat wallet requires you to establish a connection between your wallet account and your bank account, to transfer traditional currency from your bank account into the fiat wallet. The good thing about this method is that the transfer is instant and is processed without any delay at anytime of the day.
As for direct bank transfer, it can take a couple of days to process, however once the deposit is done, the funds can be quickly used to buy the selected cryptocurrency assets. So, if you have the need to perform direct bank transfers, it is advised to do some planning in advance, so that you are not left out in any opportunities.
Several crypto wallet providers in general invigorate their users to transfer and store fiat currency onto their cryptocurrency wallets, as they want their users to gain instant access to their funds, letting them take advantage of market situations, without having to go through the time, because time in finance, especially in the crypto space can make or break a deal for the user. This way, actions like investing, transferring and trading of cryptocurrencies become extremely fast.
Fiat wallets are quite flexible since you can also sell your cryptocurrency holdings for your local traditional currency and then proceed to transfer the funds into your respective platform wallet.
In terms of withdrawal, the case is also quite similar. If you are willing to withdraw fiat funds from your fiat wallet, you will need to follow steps that are mentioned below.
Steps include:
- Logging in to your fiat wallet account and then proceed to the “Withdraw” option or section.
- The interface will then ask you the amount of fiat currency you want to withdraw from the wallet.
- Next you need to choose the fiat currency that you want to withdraw.
- Moving on, select the withdrawal destination you want the funds to be transferred to. This includes either a bank account or some different cryptocurrency wallet address.
- Finally, click on the “Withdraw” button to start the transferring process.
The withdrawal process usually takes about one or two working days to finish, but there is a chance that the process might take more time, which will depend upon where you selected the withdrawal destination to be. You should always double check the withdrawal details before proceeding to hit the “Withdrawal” button.
In summary, usage of fiat wallets include:
- Transferring traditional currency from a specific bank account.
- Transferring traditional currency for buying and selling crypto.
- Buying cryptocurrency using traditional currencies.
- Perform online payments for businesses that support the wallet.
- Withdrawing traditional fiat into a specific bank account.
Value Proposition of Fiat Wallets
In short, liquidity is what provides fiat wallets their sense of value in the financial industry. In the case of a fiat wallet not being utilized, a bank direct bank deposit can take multiple working days to finish processing. This can be a huge hassle, especially when users wish to purchase cryptocurrencies during significant market price changes, or to dodge the consequences of the ongoing issue of volatility surrounding the cryptocurrency space.
The following example is quite like one mentioned above. Suppose that a cryptocurrency experiences a major drop in price valuation by the night, if there is no fiat wallet, then the user will have to show patience and wait around three or more working days for the fiat currency to process. This is also viable; however, the user will surely miss the chance to buy that cryptocurrency at its lowest recorded price during the drop.
The wallet would have been way faster, since the funds would already be stored into the user’s account, providing the ability to instantly purchase the cryptocurrency at the best price. The advantage of such quick transactions can be useful in a big range of situations the higher the transaction speeds, the better the chances of success in the cryptocurrency market.
Safety of Fiat Wallets
The safety of these digital wallets is equally important to their use cases. Losing funds can obviously be quite frustrating for anyone, so asset security is a crucial step towards advancement. As of now, both cryptocurrency and fiat wallets are quite safe, however it is also the responsibility of the user to take the right steps in securing the account. There is no wallet that is perfectly safe from attacks or exploitation.
It is generally advised to locate your wallet onto a safer place. If the wallet service is powerful, it provides users with the option of multiple signatures, that helps to add more security layers onto the wallet account. Additionally, the use of two-factor authentication is also advised, assisting you in securing your wallet with the best possible measures.
Using digital fiat wallets do have some risks that can be quite dangerous if the wallet account is not completely secured. A backup of the wallet is also important since it will help you to recover details in the case of a theft or hacking event. Hackers and exploiters can easily hack and steal funds from your account, regardless of the value stored, so it is very important for user to keep the risks in mind and take the security measures to protect the assets and account.
Advantages and Disadvantages of a Fiat Wallet
The Advantages of using a fiat wallet include:
- Asset shortage: The shortage of any asset or cryptocurrency will practically have zero effects on the fiat wallet.
- Flexible currency: Fiat currencies provide an impressive level of flexibility when it comes to the transferring of funds, in the case of both people and companies.
- Cross-border business: Fiat currencies can be stored inside of a fiat wallet to achieve liquidity.
- Good Support: Fiat currencies are supported by almost all countries worldwide, so having quicker transaction speeds provides an easier way for users to make something out of both their cryptocurrencies and fiat currencies at the same time.
- Development Cost: Fiat currencies are generally made cheaper than any other type of assets. This fact can be related to both fiat and crypto currencies.
- Convenience: Fiat wallets give investors a convenient way of purchasing cryptocurrencies or other assets, as fiat currencies do not require a similar level of security and other infrastructure to setup unlike cryptocurrencies, gold or any kinds of assets.
Compared to the advantages, there are only a few shortcomings for fiat wallets. Disadvantages include:
- Inflation: Traditional fiat currencies can become subject to growing level of inflation in the case of changes in market leading to price hikes. However, cryptocurrencies on the other hand have always been known as a counter to inflation, so they do not have to worry about that.
- Dependency on the government and companies: Dependence upon centralized governments and financial institutions directly expels the concept behind cryptocurrencies. If fiat wallets gain more popularity, then it can threaten or erode the concept of “decentralization” behind the nature of cryptocurrencies.
Differentiating Fiat and Crypto Wallets
Users who are fresh into the cryptocurrency space might think about the differences between a fiat wallet and a cryptocurrency wallet. As mentioned before, fiat wallets provide an easy way for users to store their traditional currency funds into a wallet account. Fiat wallets can be used to store funds in a digital format, assisting users in performing online transactions in a much more convenient way.
As the name suggests, crypto wallets are generally used to store digital cryptocurrency assets. There are multiple types of cryptocurrency wallets, but their main idea is to allow users to keep their cryptocurrencies secure from outsiders. A cryptocurrency wallet can also be connected to different decentralized applications (dApps) to take advantage of the offerings that the applications provide.
It is important to know the differences between a centralized and a decentralized exchange wallet. A centralized wallet will generally store a user’s private key and have slight control over it. This can be good in the case of recovery; however private keys must always be confidential. As for decentralized exchange wallets, they provide full power to the user, as only the user of the account is aware of the private key and must take responsibility to store it in a private and secure location.
Conclusion
In conclusion, fiat wallets are a great type of utility for investors to process payments in a much faster and convenient way. This will not only provide them with more trading opportunities, will also help them to progress in markets better, because of the superior transaction speeds they carry. For the best experience, you need to research on the internet about the best fiat wallets and take advantage of their use cases, to make more out of your deposits.