Many a times it so happens that the two terms are considered to mean the same. But are they really? In this article you will learn how both the terms are different from each other and how their advantages benefit the global financial market.
Digital currency
Digital currency is a term that covers all sorts of money in the electronic form. This money is such that it only exists in the virtual form and is to pay for goods and services that are available through the internet. Their characteristics are such that you can receive them, convert or even exchange them for another currency and using them can be much more convenient. The transactions of digital currencies are carried out by payment systems and regulated by banks and the state. Prior to offering it to the citizens of the country to use the digital money, it must first receive a permit from the local financial regulator. Each country has it’s own digital payment system some of which are Google pay, Amazon pay, PayPal, Paytm and a host of others.
Cryptocurrency
The concept of Cryptocurrency refers to the digital types of currencies. It is created and transferred by the method of cryptography, which is mainly based on the blockchain technology. Here, coins are issued electronically using mathematical calculations. In simple terms, Cryptocurrency is an artificial payment method which is equal to real money having an official rate.
Unlike other electronic payment systems, Cryptocurrency doesn’t require the participation of traditional money. To become the owner of a certain number of coins, all you need is just to get connected to the service, become a member of a consolidated mining network and sit back and wait for your earnings. None of the owners of the existing cryptocurrencies are tied down to any geographical point, a state or political system. Some of the Cryptocurrency specifics are mentioned below.
The transactions of most cryptocurrencies are not controlled by the national or supranational financial bodies. Each chain link is equal to each client.
Outflow is limited. According to experts, cryptocurrencies are not subject to inflation.
Funds on these crypto accounts cannot be withdrawn, frozen or arrested.
The Cryptocurrency transactions that take place cannot be reversed.
How are cryptocurrencies and digital currencies similar?
Identification process. Both kind of currencies require user information, but at different levels.
Both crypto and digital currencies are intangible that is cannot be seen in real and are stored electronically.
Third – party Involvement. This mainly relates to the transaction manipulation. In spite of the fact that cryptocurrencies are decentralized and agreed by the community, in some cases services, may request additional information to verify the transaction.
How are cryptocurrencies and digital currencies different?
The price of digital currencies is tied to that of traditional money. Whereas, cryptocurrencies, with the exception of a few, are not tied to the rate of traditional money and their value is determined solely by market demand and supply.
State regulation. Digital currencies are completely state controlled. As for cryptocurrencies there no state borders.
Faster transactions. Cryptocurrency offers it’s clients fast payments; some blockchains can process several transactions in a second. Otherwise, a regular bank payment is usually processed within a couple of days.
Crypto offers transaction transparency. Even if your personal information is hidden during a transaction you can check all the transactions that have taken place for a specific wallet if you know the address of the wallet. On the other hand, digital currency transfers are confidential and it is not possible to verify other users.
On a whole, digital currency is a term used for all kinds of electronic assets and may be sent all around the world. This makes cryptocurrency a part of digital currency having some special features like the encryption process, decentralization, fast transactions, anonymity etc.