The difference between cryptocurrencies and digital money

The difference between cryptocurrencies and digital money

A lot of tools for transferring funds and assets are available to a person today. Therefore, the importance of paper money is gradually disappearing. Now there is an active phase of confrontation between cryptocurrencies and digital money, and for some these concepts are consonant.

Therefore, today we will talk about the difference between them. Consider the advantages and disadvantages of two types of assets. Sit back, it will be interesting.

The concept of digital currency and money

Digital or electronic currency is money for the Internet, and they do not carry any other functional load for the user. They have no physical representation in the real world, but have retained the basic characteristics of traditional currencies.

For example, digital money can be received from a user, sent back, exchanged for another currency, or used to pay for goods or services (mobile or cable Internet, products from an online store). Digital currency has no geographical and political boundaries, like traditional financial instruments – transfers can be sent and received from anywhere.

In fact, it is a digital representation of traditional currencies, which is used by users to purchase goods, services and products on the Internet.

If everything is clear with this so far, then we move on.

What is cryptocurrency

Cryptocurrency is a kind of digital money. It exists only in the virtual world, and is not backed up by anything in reality. It is also a program based on cryptography and encryption methods, programming languages are used to create new cryptocurrency projects.

At the heart of any virtual coin is the blockchain. This is a chain of memory cells in which information about all transactions that users make in the systеm is continuously recorded. All data about the sender and recipient are open, and transactions are transparent.

However, it is impossible to hack such a systеm from the outside, as well as to destroy it, since there are copies of the blockchain on every device of the person who uses it.

Cryptocurrencies were created as an alternative to traditional money, the turnover, issue and withdrawal of which was controlled by the state or financial structures. Therefore, the cryptocurrency market is self-regulating without a regulatory authority. At the same time, there are also analogues of “whales” that can influence the market in a certain way.

The features of the crypto currency market and coins are high volatility (exchange rate change). Due to this, millions of traders earn money. They buy cheaper and sell more expensive.

Therefore, cryptocurrency is now used to pay for goods and services, as an investment tool. Let it be accepted and regulated by far not all states in the world.

The main differences between digital money and crypto

To make it clearer how digital money differs and differs from cryptocurrencies, here is a comparative table.

To use digital money, you need to create an account in the systеm, which will ask you to provide a photo of an identity document, as well as a number of other documents. There is no anonymity of a person in the systеm.All cryptocurrency transactions can be tracked, and there is also public information about the addresses of senders and recipients. Confidential information is not published, but it is also not necessary to talk about complete anonymity. However, there are projects where a person’s identity is completely hidden, which is often used by scammers.

Criterion Digital Money Cryptocurrency
Structure Digital money is subject to the controlling authority, and there is a clear vertical that monitors the state of the systеm, adjust it. Cryptocurrency is regulated by the majority of users, and even blockchain developers cannot influence the recording of information in memory cells, there is no possibility to change the data added to the systеm.
Anonymity
Transparency It is impossible to find out about a person’s transactions for the last month or year just like that. The activity of users in the blockchain is publicly available, and everyone can see a person’s transfers and receipts to a personal account.
Transaction Manipulation Any digital currency has a controlling body that makes strategic decisions for the users of the systеm. Management can also block any person’s assets or freeze a transaction between users. Cryptocurrency is regulated by users, and in order to make changes to the blockchain, the consent of all participants in the systеm is required. There are big doubts that everyone will vote in the affirmative for “rolling” on a particular person. The developers of the crypto project also do not have tools to control user activity.
Legal aspects In most countries of the world there is a legal regulation of the use of digital currencies. For example, a Directive in the EU or Article 4A in the USA. Cryptocurrencies are almost everywhere outside the legal field, which prevents their popularization and widespread distribution.

If everything is clear with this so far, let’s talk about the strengths and weaknesses of digital money and tokens.

Advantages and disadvantages of digital money

A digital asset or currency has strengths and weaknesses.

Advantages:

  1. Mobility – if you have a million on your account, the weight of the device will not change in any way, as well as its dimensions. You carry the entire amount with you, and you can easily transfer it to the other end of the Earth in one click.
  2. Automation – each transfer is taken into account by the systеm, and the seller will not deceive the buyer in any way. There is no need to look for change or exchange money, as is often the case with paper bills.
  3. Safety – electronic money cannot be forged, and hardly anyone can steal it from the account. Of course, there are scammers, but the risk of running into such a person is extremely small.
  4. Freedom – the user transfers electronic money from systеm to systеm, choosing more comfortable conditions of use. No one binds you to one project.

Disadvantages:

  1. Legal regulation – not all states have recognized electronic money. If most of the G20 did it, it’s not the whole world yet. Therefore, in some countries it is impossible for digital money to buy goods in a store or pay in a cafeteria.
  2. Circulation – while digital money has not been fully tested by citizens. Many in the CIS do not even know about their existence. Therefore, their practical use is still questionable.
  3. Adaptation – electronic money is extremely dependent on the devices where the application is installed. For example, the lights were turned off, the phone was discharged, and it will no longer be possible to pay for the goods or communal services.

Advantages and disadvantages of cryptocurrency

Cryptocurrencies also have strengths and weaknesses. Let’s consider them in order.

Dignities:

  1. Reliability -cryptocurrency cannot be forged, and it is reliably protected by encryption algorithms.
  2. Decentralization – no one can control the movement of transactions, as well as set the issue of tokens. The cryptocurrency is practically independent, and does not have a supervisory authority from above.
  3. Open source – anyone can set up a PC to mine coins.
  4. Limitation – the number of coins is programmatically limited in most projects, which will lead to an increase in their value in the future.
  5. Anonymity – it is impossible to track a person’s personal information in the blockchain. There is a public part, but it says little about the user.

Disadvantages:

  1. Danger of loss – A coin storage wallet generates a password that cannot be hacked. However, if the device or this sequence is lost, it is impossible to restore access to your cryptocurrency.
  2. High volatility of the exchange rate – the cryptocurrency market is still extremely young, so the quotes of tokens can fall by 50% in one session, and then rise by 200%. The rise or fall of the exchange rate is also influenced by news from outside, as well as whales with large capital. This is especially true for projects with low capitalization.
  3. The risk of prohibition – the governments of many countries have officially banned the use of cryptocurrencies on their territory. Therefore, no one knows what decision the authorities of the country where you live will make.
  4. No guarantees – if you sent money to a fraudster, then it will not be possible to prove his involvement in something, since the responsibility for the tokens lies only with the owner.

Conclusions: so what to choose

Electronic money is convenient to use as an alternative to paper money. It is convenient to use digital currency to pay for goods, utility bills, and the Internet. At the same time, it will not be possible to completely abandon paper funds, since the practice of paying for goods and services with electronic money is not widespread everywhere.

Cryptocurrency is about paying for services and other products with certain restrictions. Not all manufacturers and companies are willing to accept payment for this type of asset. Tokens are also an investment tool. If you properly assemble a portfolio of assets, you can reduce the negative impact of the high volatility of the cryptocurrency market.

If you need a means to pay for goods and services, use electronic money. If you need profit, and care about the anonymity of payments, choose one of the cryptocurrency projects. This is the difference between electronic funds and cryptocurrencies. Cryptocurrency can also be exchanged in digital exchanger.

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