Crypto vs. traditional currencies – what are the differences, what is their value?
10/23/2025
6 min
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With “cryptocurrencies” becoming increasingly prominent in the economic news, many individuals are wondering how they function and what their real value is. How do they differ from traditional currencies such as the euro, and can they really be considered currencies? To shed some light on the subject, Yann BRAOUEZEC, professor of finance, explains the main differences and the mechanisms that govern their value.
Could you briefly explain what “cryptocurrencies” are?
It is not possible to explain what “cryptocurrencies” are, and let’s say the most famous of them, Bitcoin, without first mentioning what we actually mean by currency.
Although currency is still a subject of debate among economists, it can be defined in minimalist terms as a simple “medium of exchange” used for trade. Since prices are expressed in units of this medium of exchange, a price is nothing more than the quantity of the medium of exchange that must be paid to purchase a good.
When the monetary goods are gold, the price is expressed in carats, for example. When it comes to fiat money (coins, banknotes), the price is expressed in monetary units, such as euros. If the price of a good is 15 euros, paying with fiat currency therefore means giving the seller a quantity of monetary goods with a face value of 15 euros.
Fiat currency has not been convertible into gold for more than 50 years. Fiat currency is therefore essentially based on “trust” and has no “intrinsic value,” as gold may have. If a 100-euro bill, for whatever reason, is no longer accepted, that bill has no intrinsic value. In “normal” times, i.e., outside of a monetary crisis, a seller will readily accept a (genuine) $100 bill because they know they will be able to use it as they wish in the future, as this bill is accepted by everyone at its face value of $100.
With the development of technology (computers, cryptography), money has become electronic, i.e., a set of accounting entries. Thus, when you pay €100 with a bank card (or smartphone), you are instructing your bank to debit your account for €100 and credit a third party’s bank account for the same amount. When we consider the different functions of money (fiduciary, electronic), we can identify three. Firstly, it is a universally accepted medium of exchange, as already discussed, it is a unit of account, i.e., prices are expressed in its unit, and finally, it is a store of value.
This last characteristic is fundamental. It means that the value of the currency is “preserved over time,” to use the terminology of the European Central Bank. In an economy ravaged by hyperinflation, for example in Germany in the 1930s, Russia in the 1990s, and more recently Venezuela, to name but a few examples, the value of the currency is not preserved over time, as it loses its value very quickly. This rapid loss of value also fuels expectations of very high inflation, which only reinforces inflation, as currency becomes a “hot potato” that must be disposed of as quickly as possible, i.e., spent.
The “store of value” characteristic is therefore fundamental to the normal functioning of an economy. This is why in many countries, the mandate of the central bank focuses on this property of being a store of value. The European Central Bank’s mandate is to maintain inflation at 2%. This is a “symmetric target,” meaning that the ECB intervenes if inflation deviates significantly from the 2% target.
So, what are the differences between official electronic currencies and “cryptocurrencies”?
Over the past 15 years or so, new electronic currencies referred to as “cryptocurrencies” have emerged, the most iconic being Bitcoin and Ethereum. Without going into detail, the main difference between official (electronic) currency (euros in a bank account) and Bitcoin, for example, is the way in which transactions are validated or certified. When you make a payment with a bank card, validation is implicitly carried out by the bank, i.e., in a centralized manner by a clearly identified authority.
On the other hand, when you make a payment with Bitcoin, validation is done in a decentralized manner, i.e., it is not carried out by a clearly identified central authority, but by a network of “miners,” through a network of connected computers, who are paid (in Bitcoin) to validate the transactions that appear on the (transaction) ledger called blockchain. In reality, the term cryptocurrency is not appropriate when referring to Bitcoin. It has nothing specifically cryptographic about it, nor is it a currency!
When you make a payment by credit card or when you pay in Bitcoin, the payment is based on a cryptographic protocol in both cases. Using a credit card requires a 4-digit code because there is an underlying cryptographic protocol (the EMV protocol) that secures the payment. In terms of payment, the cryptographic aspect is therefore not specific to Bitcoin, except that it is not based on the same protocol as credit cards, even if the ultimate goal is the same: to authenticate, secure, and validate a payment.
As mentioned, one of the important functions of a currency is its stability over time, i.e., its role as a store of value. As the ECB notes on its website about Bitcoin, its value has sometimes skyrocketed and sometimes plummeted within a matter of days. To put it in financial jargon, such volatility is incompatible with the property of being a store of value.
Finally, the majority of stores (physical or online) do not accept Bitcoin, which means that it is not a universally accepted medium of exchange. Bitcoin is therefore what can be called a “crypto asset.”
In this sense, it is naturally of interest to hedge funds looking for an asset with high volatility.
Given the significant fluctuations in the price of “cryptocurrencies” such as Bitcoin, what is the real value of these decentralized digital currencies at present?
When looking at Bitcoin, it is important to distinguish between the electronic currency called Bitcoin—which actually functions as a foreign currency since its convertibility into euros is quoted—and the blockchain on which transactions are recorded. This blockchain has a certain intrinsic value since it can be used to record transactions, of course, but it can also perform many other functions. For example, university degrees can be recorded on this blockchain!
However, since Bitcoin is seen as a “crypto asset,” its value should therefore be compared to that of other financial assets such as stocks or bonds. A financial asset such as a stock or bond derives its value from the promise of income it generates. Financial markets are therefore the place where “the trade in promises” takes place, to quote the title of Pierre Noel Giraud’s book “le commerce des promesses ».
In the case of Bitcoin, the question of its financial valuation is quite simple. Since Bitcoin will never pay its holders a single monetary unit, calculating its current value is particularly straightforward: it’s zero! However, this is not entirely accurate when compared to stocks. When we look at the world of stocks, shareholders receive two types of remuneration. On the one hand, there are the dividends they can receive over time, and on the other hand, there is the capital gain they can expect when they sell their shares. For many years, under Steve Jobs, Apple did not pay dividends, but the share price did not collapse; quite the contrary. But what was valued in the market were Apple’s inventions (present and future), in this case those of Steve Jobs.
Bitcoin can therefore perhaps be compared to a stock listed on the markets that does not pay dividends and whose only value comes from (potential) capital gains. However, if this company that does not pay dividends were to go bankrupt for any reason, its assets (tangible and intangible) would be sold off, generating some income. If Bitcoin were to go “bankrupt,” for example because it was no longer profitable to validate transactions on its blockchain, what would happen? Since the blockchain is public, it makes no sense to think of the Bitcoin blockchain as an “asset” with a certain value that could be resold. In this case, we might see the death of Bitcoin, or perhaps a small group of individuals would try to take control of it to ensure the continuity of the network and thus preserve the value of bitcoin…
This is the English version of an interview originally published in French.
