Often people consider cryptocurrency as a digital currency because the transactions are done digitally, and the process is somewhat similar, but despite being a digital currency, cryptocurrency has several major differences that distinguish digital currency from cryptocurrency currency.
The cryptocurrency was created to lift the drawbacks of digital currency, and each single day developers are trying to develop these cryptocurrencies to make them better and an efficient way of transaction between parties all over the world.
Digital currency is the virtual form of money for making transfers from one person to another digitally, and cryptocurrency is the encrypted form of digital currency, which is decentralised and highly volatile in the trading business. There are plenty of cryptocurrencies, among which Bitcoin is the most valuable, that can be used to make transactions from any part of the world to another. Difference between a digital currency and a cryptocurrency:
1. Structure of the currency
The primary difference between a digital currency and a cryptocurrency is its structure. A digital currency is regulated by a central bank, and the servers through which transactions are made are regulated by the central authorities. A digital currency is a centralised currency where the central banks operate the entire banking system.
On the contrary, a cryptocurrency is a decentralised currency and no central banks, government authorities or any country. There are no rules as such to make a transaction with cryptocurrency apart from those dictated by the crypto community. It can be transferred from one person to another without any third-party intervention.
2. Anonymity of people
Another basic difference between a digital currency and a cryptocurrency is the anonymity of people. Before using any digital currency, you have to complete some documentation process and get it verified to start a transaction with digital currency. This documentation process would require your identity verification, proof of address, and bank details.
On the contrary, to make a transaction in cryptocurrency, you just need to get registered with a crypto exchange and open your digital wallet where you can store your cryptocurrency. However, you don’t get complete anonymity with cryptocurrency because the transaction is made through a blockchain, and the entries are recorded in the ledger, which is not hard to track.
3. Transparency in transaction
Transparency in the transaction is a vital factor that separates a cryptocurrency and a digital currency. While making a transaction with digital currency, both the parties involved in the transaction will get information regarding the transfer process, such as the amount, name of the bank and date and time of the transaction. This makes no or very less transparency in the information in the case of digital currency.
Whereas in the case of cryptocurrency, transparency is one of its features. There is complete transparency between the sender and receiver with cryptocurrency as it is based on the blockchain network. All the information related to the transaction is recorded in the ledger of both parties. But all this information is secured with confidentiality and cannot be accessed by any third party.
4. Management of transaction
Transaction management is another factor that makes a cryptocurrency different from a digital currency. The digital currency system is operated by a central authority which is the central bank associated with each currency. These central authorities deal with various kinds of problems and provide solutions for them, cancellation of transactions in case of fraud or transfer by mistake or freezing digital wallets in case of any fraudulent activity.
On the other hand, cryptocurrency is monitored by the crypto community who can approve of making changes in the ledger in the blockchain. There is no other authority or third party that can intervene between transactions made by one party to another.
5. The legal framework of the currency
The legal framework between cryptocurrency and digital currency is what makes the difference between them. The centralised digital currencies which are regulated by the central authority are based on a legal framework and are considered legal in every country. On the contrary, the legal status of cryptocurrency is yet not determined by several countries. But in some countries, cryptocurrency has a legal status, and you can make a transaction in cryptocurrency. In fact, the world’s famous companies like Tesla have started to accept Bitcoins to make payment in cryptocurrency.
6. Transaction fee
The transaction fee involved while transaction in digital currency is too high because of the difference in exchange rates of different currencies of different countries. When buying a luxurious asset from a different country, you have to pay an extra transaction fee every time you use your digital wallet to make payments.
On the other hand, there is no transaction fee involved during a transaction in cryptocurrency. The blockchain network prevents any involvement of third parties to charge an extra commission, and also, the expenses are lesser as much as possible. This makes it possible to buy valuable assets at a much cheaper price.
7. Encryption of the currency
This is another major difference amongst the several differences between digital currency and cryptocurrency. A transaction in digital currency is not at all encrypted, i.e., the central authorities have complete access to your information and data and can monitor your transactions anything they want to. There is no security provided in digital currency regarding your account getting hacked by hackers.
Though stricter regulations are implemented, and online transactions are becoming more secure with new safety measures, but still, it’s not fully protected. On the contrary, the cryptocurrency payments are fully end-to-end encrypted, and you have to open an account in a crypto exchange that uses high-end safety measures, and your cryptocurrency stays safe from cyberattack.
Final Words
These were major differences between digital currency and cryptocurrency, and it is so clear that cryptocurrency is a revolutionary change to the financial sector and will open several barriers for fair international trades and transactions. There are plenty of crypto exchanges that help you to trade in cryptocurrency.
These platforms offer you the opportunity to earn profits by investing in cryptocurrency, which tends to increase in value like Bitcoin, etc. If you want to start trading in Bitcoins, then here is the perfect opportunity for you. Now even beginners with no knowledge in trading can make some good profits from trading in cryptocurrency. For more info about bitcoin and start trading in bitcoin check: https://bitcoin-prime.app/.
