Fiat and cryptocurrency are the same but people in society differentiate them and value fiat because its adopted by the government far back, and since the existence of the world and also a specific country, so from my research I find out that government just disliked cryptocurrency for nothing,
So differentiating fiat from bitcoin is valueless because irrespective the importance and massive adoption of fiat currency from its existence before cryptocurrency, it's obvious that fiat is money and bitcoin is money, their functions and contribution in society never depart from each other, so bitcoin now is the shortest way of transactions across the world without much process or procedures, using bitcoin everything buyable is easier to purchase without stress, so from my perspective I prefer bitcoin than fiat currency due to fast transactions process across another country, and nothing fiat can purchase bitcoin can't purchase, so no difference between both because all are currency.
In general, you are right when you say that fiat and cryptocurrencies are money, but of course they have a number of differences that, on the one hand, give advantages, on the other hand, they have problems. States will never accept cryptocurrencies, cryptocurrencies because they are not governed by the state and there is logic in this. The fact is that a state that does not have control over finances, for example, has the opportunity to get problems that, as a result, can negatively affect the state itself and its development. It's another matter if the state launches its own cryptocurrency, then this could solve some of the problems with misunderstanding and, as a result, partial use of cryptocurrencies as money could take place. But as you correctly noted, there are many similarities between fiat and cryptocurrency, and probably in the future all the money in the world will work on blockchain technologies.