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.
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.
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.
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.
|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.|
|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.
A digital asset or currency has strengths and weaknesses.
Cryptocurrencies also have strengths and weaknesses. Let’s consider them in order.
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.