What Separates Crypto-currency From Digital Currency?

We’re living in a fast-paced world, thanks largely due to the innovation brought by technology. Advanced technology has made a tremendous positive impact in every sphere of life, be it for individual or industrial purposes. One of the latest trends that technology has contributed to the 21st century is that of digital currency. It can be associated with traditional currency because of their similar functions. Digital currency is an internet based form of currency. Many people mistake digital currency for virtual currency, which is a type of unregulated money, which is issued and usually controlled by its developers. Its usage is also not widespread and is restricted to the members of a specific virtual community.

Virtual currency is different from digital currency simply because it lacks all the attributes of real currency. Even though cryptocurrency is a type of digital currency, there are some basic differences between the two. Let us read more about what differentiates the two.

Structure: Digital currencies are centralized, which implies that there’s a specific group of people and computers that control the nature of transactions in the network. Virtual currencies, on the other hand, are decentralized and the majority of community regulates the state of transactions.

Anonymity: You cannot deal in digital currencies unless you have a user identification. You will need to upload a self-photograph and some other documents that are issued by public authorities. On the other hand, cryptocurrencies can be traded anonymously. Buying, investing, and any other cryptocurrency processes do not require user identification. However, cryptocurrencies are not fully anonymous. Even though the users do not need to provide name, residential address, etc., each transaction is registered. The senders and receivers are known publicly, hence all transactions are tracked.

Transparency: Even though digital currencies are centralized, they are not transparent. You cannot see all the money transfers or even choose the address of the wallet. This type of information is kept confidential. On the other hand, cryptocurrencies score over digital currencies in this regard as they are transparent. You can see any transaction of the user because all the revenue streams are placed in a public chain.

Transaction manipulation: Digital currencies have a central authority that is assigned the task of dealing with such issues. If it suspects any fraud or money laundering, it can cancel or freeze transactions with immediate effect. Cryptocurrencies, on the other hand, are regulated by the community. It is less likely that the users will approve any changes in the blockchain, although exceptions are always there.

Legal Aspects: Many countries have some sort of framework in place for digital currencies. For example, Directive 2009/110/EC in the European Union, or Article A4 of UCC (Uniform Commercial Code) in the US. At the moment, cryptocurrencies remain unregulated and that means that there is no framework implemented by countries. Moreover, superpowers like China have implemented a complete ban on their trade, so there is a sense of uncertainty about them.

Ease of Currency Value Influence: With digital currencies, this can never be done easily without due considerations for the ripple effects. Financial institutions and regulatory bodies determine the value of the currency, inflation rates, and the value of each currency. On the other hand, cryptocurrencies can be easily exploited for illicit activities.

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