Cryptocurrency vs. Digital Currency: What Are the Differences?

Cryptocurrency vs. Digital Currency

Did you know that 38% of those with non retirement investment accounts know all of the types of investments they hold? This means a majority of investors don’t know what they are investing in.

When it comes to digital currency and cryptocurrency, it’s possible to invest without knowing. However, you are in a much better spot when you research the two. We’ll help you start now.

What are the differences between cryptocurrency and digital currency? Keep reading to find out.

What Is Digital Currency?

Digital currency is a balance or a record stored in a distributed database on the internet or within digital files. Digital currency can be in the following forms:

  • Digital money
  • Electronic money
  • Electronic currency

A specific example of this would be cryptocurrencies or central bank digital currencies.

Because they don’t have a physical form, instant transactions are possible. Yet, it can act the same way as physical or traditional currency.

Physical money used online through banking and for retail or other online shopping experiences is not considered digital currency. Some propose that it should be a digital currency.

What Is Cryptocurrency?

In a basic cryptocurrency guide, you would learn that crypto is for investments. It is much more than that because it is a digital asset working as a medium of exchange.

Individual coin ownership records get stored in a ledger on a computerized database for the following reasons:

  • Securing transaction records
  • Controlling the creation of additional coins
  • Verifying the transfer of coin ownership

It doesn’t exist in physical form and is a type of digital currency. Cryptocurrencies often use decentralized control instead of central banking systems.

When using decentralized control, each cryptocurrency will work through a distributed ledger technology or blockchain that services as a public database.

Bitcoin is the most common blockchain, but cryptos like Marscoin have been derived from Bitcoin. You can learn more about Marscoin here

Cryptocurrency vs. Digital Currency

Understanding cryptocurrency means knowing that it is a variant of digital currencies, yet there are still differences between the two. Let’s dive deeper into cryptocurrency vs. digital currency.

Digital currencies are centralized which means that it is a regulated transaction through a centralized location, a bank being the most common example. Decentralized cryptocurrencies are the most common.

Digital currencies aren’t transparent meaning you cannot choose the address of the wallet and see all transfers. This information is kept private and confidential whereas most cryptocurrencies are transparent.

Digital currencies include a central authority that can freeze or cancel transactions when the authorities or account owner requests to do so. Cryptocurrencies get regulated by the communities instead.

There is some legal framework surrounding digital currencies in a lot of countries, including the United States. The same cannot be said for cryptocurrencies as they do not have official status.

Are the Lines Blurred?

You could definitely say that the lines between cryptocurrency vs. digital currency are blurred.

Most people believe that the terms digital currency and cryptocurrency are one and the same. In reality, digital currency is an umbrella term that comprises cryptocurrency.

Now that you know the differences between the two, you’ll have a better chance at understanding your possible investments.

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