• Sun. Aug 14th, 2022

The difference between cryptocurrency and digital currency

ByHazel R. Lang

Jul 25, 2022

Are digital currency and cryptocurrency really different?

Digital currency and cryptocurrency are often confused as the same thing, but that’s not really the case. Digital currency and cryptocurrency have their own similarities and differences, which you can find out at the end of this article.

Since the emergence of cryptocurrency and the general acceptance it has received in recent times, the use of digital currencies has also increased. Due to its contactless advantage, it has become the center of financial and technological advancements during the pandemic. Now, both currencies are getting talked about, but many are still confused about them.

What is digital currency?

Digital currencies are the government-issued electronic version of fiat currencies. They are used for contactless transactions between parties, for example, when money is transferred electronically from one bank to another.

Central authorities and governments regulate digital currency. You use digital currencies when you transfer money online from your bank account or digital wallet of equivalent value to fiat currency. Digital currency is transformed into cash when you use an ATM.

What is Cryptocurrency?

Cryptocurrency is a type of cryptographically secured and cryptographically backed virtual currency. It uses blockchain technology and is decentralized, which means that it is not controlled or regulated by authorities or governments. They have no existence in the real world.

Online payments and investments can both be made using cryptocurrencies such as Bitcoin, Ethereum, and Litecoin. People buy Bitcoin or other cryptocurrencies and use it as a payment method and investment tool. Cryptocurrency prices fluctuate rapidly as the crypto market is unstable.

Difference Between Cryptocurrency and Digital Currencies

The difference between the two can be easily determined in terms of encryption, stability, usage, regulation, security, anonymity and many more.

Digital currencies are mostly centralized and do not need encryption. At the same time, users should be very careful and should set strong passwords in order to protect it. Additionally, debit/credit cards are commonly used to transfer or withdraw digital currencies. A strong PIN or password must therefore be configured.

Cryptocurrencies, on the other hand, are encrypted. For cryptocurrency trading, a bank account with digital currencies is required. You can exchange digital currencies into cryptocurrency through a cryptocurrency exchange.

Digital currencies are fully regulated and backed by governments. To use digital currencies, users must provide personal identification information. While cryptocurrency is decentralized, no government or authority can control it. It is therefore not regulated.

Authorities, financial agencies and governments around the world are trying to issue regulations regarding the acceptance of cryptocurrency and blockchain technology, but it may take some time.

Digital currencies are used all over the world so they are very stable and it is easy to manage transactions as they are very well accepted in the global market. Cryptocurrency is a highly volatile market due to less widespread acceptance and increased price volatility. It is gradually becoming popular, but there is still a long way to go.

When using digital currencies, transaction information is only available to the sender, receiver, and authorities. However, in cryptocurrencies, data is open to the general public, but identities remain anonymous. All crypto transactions are secured on the decentralized ledger, but users can remain anonymous.

You can reverse transactions or request refunds while using digital currencies, but cryptocurrency transactions are generally irreversible. Digital currencies have been around since the emergence of the internet. However, the first cryptocurrency, Bitcoin, appeared in 2009.

The dynamic nature of cryptocurrency and digital currency makes it difficult to differentiate between them. However, if you use or plan to use these means of payment, it is essential that you know the technical aspects, the similarities and the differences.

A cryptocurrency is a form of digital currency, but it is very different from regular digital currency. People are investing in cryptocurrency these days and seeing it as an investment asset.

Here are some examples for both:

Digital currencies: Paycoin, Digital Yuan (China), money stored on debit/credit card.

Cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Ripple (XRP).


This article has explained the basic difference between cryptocurrencies and digital currencies. Both are e-money, which means they don’t exist in the real world, and we can’t touch them.

People can only use them for online transactions. Each has its own unique characteristics which people consider as its pros and cons. Finally, cryptocurrencies and digital currencies both play a crucial role in the existing payments landscape.

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