Within the past couple of decades, technology has been massively advancing. This has led to the automation of numerous processes. The digital transformation has created a revolution in the finance field, especially in the forms that currency can be held. In modern times, there are digital wallets whose purpose is to hold digital currency as well as cryptocurrency, also known as digital coins These wallets are similar to traditional ones, that were used to hold tangible money in form of notes and coins.
Since both crypto and digital currency are held in the modern type of wallets, it makes it difficult to distinguish between the two currencies. Digital currency is simply the electronic form of coins and notes. This currency can be transformed into cash and even withdrawn from a bank or an ATM. It is intangible but can still be transferred from one party to another using digital media, without physical contact with the currency.
Cryptocurrency is simply referred to as “crypto”. It is a digital currency that is encrypted and designed to perform as a mode of exchange. Crypto is not issued by any central authority and does not exist in any physical form. In the investment market worldwide, cryptocurrency is very volatile. Crypto goes by multiple names, based on the corporation that instituted it. Blockchain technology is utilized in its generation, for enhanced convenience when in use.
Significant Differences Between Digital Currency and Cryptocurrency
1. Transaction Charges
When dealing with cryptocurrency, users do not incur any charges. With the help of blockchain technology, expenses are minimized while additional commissions are eradicated. Therefore, investors who have to make substantial transactions opt to work with cryptocurrency since it shields them from the costly transaction fee. On the other end, transacting digital currency involves heavy charges.
Reserve banks are responsible for managing and overseeing all activities relating to the use of digital currency. There is a central system that serves as the authority governing digital currency. However, cryptocurrency operates from a decentralized system whereby there is no common authority that controls this type of currency. Transactions involving cryptocurrency are not monitored by a third party.
This is one of the most fundamental differences between the two currencies. While cryptocurrency is highly encrypted, digital currency is not encrypted in any way. To transact digital currency, the only requirement is to open an account without any stringent safety measures. On the other end, strict safety steps are taken to ensure that cryptocurrency accounts are shielded from being hacked and compromised by cybercriminals.
Due to its volatility, it is difficult to predict the stability of the cryptocurrency. Furthermore, it is yet to gain global acceptance as a medium of exchange. Digital currency is relatively stable and has always been the primary mode of making payments. All corporations worldwide accept the use of digital currency when making or accepting payments. Its current rate is usually steady and almost consistent, unlike that of cryptocurrency.
There is a transparent record of all crypto transactions, unlike in digital currency. Both the present and past conversations between the transacting parties are publicly available when dealing with crypto. For security, confidential conversations cannot be accessed by another party besides the dealers. Details about digital currency transactions can only be accessed by the authority and the parties sending or receiving the currency.
Even though the two terms are used interchangeably, there is a clear distinction between the two currencies. The dominant use of these currencies prevailed during the pandemic, due to the need for contactless transactions. Even so, the use and benefits of cryptocurrency may still be an unfamiliar concept to many. You can look into Dan Hollings The Plan which is a crypto training system, to equip you with all the necessary knowledge regarding cryptocurrency.