How Cryptocurrency Is Different from Digital Currency

All the Cryptocurrency can be considered Digital currency. And the reason is that it exists on the Digital Ledger. But can we say Digital currency to be Cryptocurrency? Whenever this question comes in, most of the people get confused about the existence of the Cryptocurrency.

We all know that the only difference that can be concluded between the Cryptocurrencies and the regular fiat currency is its digitalized transaction. Abd the reason for Cryptocurrency becoming so much popular is that it is a decentralized currency on which the Government holds no authority. This feature omits the middle man or any kind of third-party platform.

Why digital currency is called “Digital”?

When we are talking about the Digital Currency that always does not mean decentralized currency. Because even the fiat currency can be transferred digitally. That does not mean those fiat currencies can be called cryptocurrency, just because they are digital currency. The reason is very simple, these fiat currency transactions (whether online or offline) are done by following the rules of the government.

So, no matter which digital medium you are using for the transaction, if the medium is doing the transaction by following the Government rules and regulations, it will still be traditional methods.

So, what we learn from the above explanation. We learn that the digital currencies are restricted by government policies, whereas Cryptocurrencies are not.

Cryptocurrencies have different objectives than Digital Currency

Bitcoin is the first cryptocurrency that surfaced in the market in 2009. The main motive of introducing this currency into the market was to get business hands away from government regulation. Today Bitcoin and the other Cryptocurrencies are decentralized currencies.

To avoid the fluctuation in their controlled economy, the government tends to keep a distance from the Cryptocurrencies. However, after the price evaluation of the Bitcoin in 2017 made the government ask for the taxes from the Cryptocurrencies profit.

Within this short period of time, cryptocurrency has gained recognition of the many experienced traders and investors. Today, Cryptocurrency is used by the traders and investors for both short term and long-term investment. Also read about online gaming and cryptocurrencies online. 

During the time of the Cryptocurrency exchanges, a procedure is used called Consensus. Consensus means that both the party (sender and receiver) admits the value of the Cryptocurrency. And the transaction is then double-checked to make sure that the coin sent by the sender is authentic and sent by an authentic account. All the encryption and decryption is done with the help of blockchain technology.

Crypto Funds

The Crypto funds that are being talked here is the fund raised by with the help of Cryptocurrencies. Let’s take a scenario where you have to raise the capital for your company. You have set up different portals and platforms. In addition, you are welcome to Crypto tokens.

What do you think will happen? The people who are well versed in the Cryptocurrency will always go for Crypto tokens. As they will not be charged any extra transactional fees. As in fiat currency transactions. 

Conclusion

If we see the current standing of both Fiat and Cryptocurrency, we can still say that cryptocurrencies still lacking in the market size. Fiat currencies are controlled by the government; hence, people tend to believe in their authenticity. Where on the other hand, the government holds no authority on the Cryptocurrency. Cryptocurrency is used by the people who believe in them so whenever that belief shatters, so does the value of the cryptocurrency.

So, it is totally up to your which side you are on, fiat currency that has the government’s backing up or Cryptocurrency controlled by the public ledgers.

Posted in: Personal Finance

Top of page