I was introducing cryptocurency to one of my friend and after so many explanation, he asked me the difference between the two currencies, so below was my answer to him
These forms of currencies are inherently similar. However, their similarity devolves into distinct features when they are examined more critically. Here are some of the major differences between digital currency and cryptocurrency.
1. Decentralization vs. centralization:
Banking system, a majority of digital currencies are regulated by regulatory bodies like the Federal Reserve or other designated government parastatals. This means that transactions are constantly monitored, and their value determined by these regulatory bodies.
On the other hand, cryptocurrencies are fully decentralized. This means that no institution is set aside to regulate them. The rules are set by its community. As a result, the viability of a cryptocurrency is highly dependent on the strength its community can garner.
2. Privacy:
Privacy in this sense refers to the ability to conceal the information of the account owner.
With digital currencies, this is practically impossible. To open a digital account, you need to upload your photo and fill in your personal details, to make use of services like PayPal, you have to fill in your information like name and address. Hence, you can easily be tracked.
On the other hand, you don’t necessarily need to disclose any of your personal information when opening a wallet for cryptocurrency trading. In fact, coins like Dash are available to provide full anonymity, and this is one of the reasons why cryptocurrencies were widely used on the dark web.
3. Transparency:
The framework of digital currencies only allows approved entities to get access to the transaction information. Information regarding transactions of which you’re not directly connected is withheld from you.
On the other hand, cryptocurrency transactions are made available to the public domain. Even though the people behind the transactions are unknown, this way, you can personally monitor how much money is in the system.
4. Legal framework:
Most digital currencies are backed by a recognized central authority. Having legal support from government and financial institution establishes their general usage and acceptance.
On the other hand, cryptocurrencies aren’t backed by any form of a recognized body. As a consequence, they’re not yet fully recognized as a legal tender worldwide.
5. Dominance:
Due to their recognized backing, digital currencies are accepted all over the world. Carrying out transactions with digital currency isn’t restricted by geographic borders, race or even belief systems.
Cryptocurrencies, on the other hand, are loners. They are only accepted by a small group of institutions and compared to other centralized digital coins, their popularity doesn’t measure. Although analysts pose that this will soon change and government regulations will be more favorable towards cryptocurrency.
6. Transaction interference:
Since transactions are monitored by central authorities when using digital currency, they can easily flag transactions suspected to be suspicious or even freeze an account temporarily on the request of the owner. This makes transaction reversible.
On the other hand, once a transaction is completed with cryptocurrency, it is automatically added to the Blockchain and is forever irreversible.
7. Value fluctuation:
For digital currencies, its value is determined and regulated by financial institutions. This makes the currency relatively stable.
Cryptocurrencies, on the other hand, are unregulated. This makes them highly volatile and susceptible to slight behavioral changes in its community.
Hope this will help many newbie here. Cause i myself still learning.
Crypto = encrypted, build on blockchain
digital currency = no encryption, not on blockchain.
