Digital Currency vs Cryptocurrency: What’s The Difference?

In the modern world, new technologies are emerging all the time. It can often be hard to keep up with these technologies and to understand how they work and what they are used for. This is particularly true with technologies used for financial transactions, where advanced algorithms and computer networking are increasingly being employed to keep transactions reliable and secure.

Two financial transaction technologies you have probably heard a lot about over the last few years are digital currency and cryptocurrency. So what are these two technologies and what are the differences between them?

– What is digital currency?

Digital currency is basically any currency that exists in a digital form rather than a physical one. Most digital currency is similar to standard physical currency such as coins and banknotes in that it is backed and managed by financial institutions. Transactions are often managed on a client-server basis with a variety of security measures in place to ensure transactions are safe and secure.

In many cases, digital currency may exist in a purely digital form. In others, it may be backed up by some form of physical commodity. Some institutions that have traded in digital currency have also held gold or other precious resources equivalent to the value of their digital currency to ensure that currency has actual real-world value.

Digital currency is not always used for real-world transactions. Many multiplayer video games with a persistent world use some form of digital currency that may be directly or indirectly tradable between players. These currencies are usually used to buy in-game items and may be purchased with fiat currency or earned via gameplay. In some cases these video game currencies may even be able to be traded back into fiat currencies, allowing some players to make a real-world profit from their gameplay.

– What is cryptocurrency?

Cryptocurrency is a type of digital currency that relies on the science of cryptography to encode cryptocurrency transactions. It uses blockchain technology to maintain a history of transactions that allows those transactions to be verified and protected from fraud. This allows cryptocurrency to be portable, decentralized, and secure.

– What’s the main difference between the two?

While cryptocurrency is a type of digital currency, the term “digital currency” frequently refers to digital transactions between banks and other established financial institutions such as credit card companies. In this regard digital currency is basically a digital form of fiat currency and is ultimately controlled by the government of the country it is traded in.

The purpose of cryptocurrency is to break away from government and institutional control of currency transactions. It is designed to be a more open way of trading value and goods that is less subject to government oversight and less likely to be co-opted for political ends.

Cryptocurrency offers an alternative to the centralized control of money transactions in order to give the power over those transactions to the public, rather than to governments and banks.

A core problem with cryptocurrency though is that its decentralized nature also makes it extremely volatile. Ideally, cryptocurrency and fiat currency in both physical and digital form should work together to provide alternatives and fallbacks that end up making both types of currency more stable and secure.

In the past, there was less of a need for something like cryptocurrency. There has always been the option of direct barter to provide decentralized transactions, and fiat currencies were much more loosely controlled before computers and networking provided governments and institutions with more direct control over them. Now that they have that direct control there needs to be a way for private citizens to stop that control from becoming oppressive.

Both of these types of currency have their place in the modern world. Each has its pros and cons which are largely offset by the cons and pros of the other. The world needs the stability of fiat currency in digital form, and it needs the freedom from centralized control that cryptocurrency provides. Without one or the other, the risk of either instability or stability that enables oppression rises dramatically.

Can Blockchain Change the World?

Blockchain or distributed ledger, names that the blockchain also receives, constitute a distributed database that records blocks of information and interlaces them to facilitate the retrieval of information and verify that they have not been modified.

By transferring this information into practice, blockchain technology allows decentralized, transparent, open transactions and contracts that shield privacy, guaranteeing extreme security and the same protocol for all participants, that is, it allows an anonymous movement, with total privacy between the data of both interested parties. It has already been compared by experts with historical milestones of innovation such as the emergence of the Internet.

On the other hand, the expansion of cryptocurrencies, such as bitcoin, which have their stock market, changes payment methods and traditional money. The digital revolution and P2P (peer-to-peer) technology applied to cryptocurrencies implies a low risk and works between user platforms, through consensus among all. Today, they can be bought and sold easily, just as their trend will only grow shortly.

Among many other applications, the blockchain allows you to carry out Smart contracts, allowing you to securely connect the devices linked to the Internet of Things, democratize the electoral system through electronic voting, improve eCommerce and encourage the collaborative economy, assess the traceability of food, ensure more efficient logistics operations or make the flow of goods and money from any commercial process verifiable at any point in the supply chain.

The complex revolution that the blockchain represents, can be executed in all sectors, benefiting for example the leisure and entertainment industry allowing to preserve the copyright or regulate the economic compensation of the artists, to the security forces by allowing real-time monitoring o transparent access to databases or the transport industry, facilitating the identification of passengers.

While a decade ago the word did not sound even in a tiny portion of mouths compared to the current moment, the blockchain, popularized by the emerging fame, although criticized, of Bitcoin and other virtual currencies, comes from the hand of a broad riotous potential that can affect areas as diverse as politics, economy, commerce, leisure, cybersecurity, law, logistics, arms possession, Artificial Intelligence, business team management, cloud storage or the gaming

Blockchain technology generates transparent and faithful information, it is changing the way bank transactions are carried out, the way money and the labor market are conceived in the global context. Beyond this, it allows the storage of data in a way that did not exist before, just as the encryption of the information can be done more reliably.

Another consequence of blockchain in society is its inclusion in the labor market. If large numbers of computer scientists are already demanded today, sometimes more than can be filled, the demands of blockchain developers cover the largest quota of these vacancies.

All this is just the beginning of a large market full of profits for various sectors such as health, finance, and banking, insurance or insurtech, food or education, all of them thanks to the touch of digital transformation at this point in the XXI century.

Today, the question is, which industry cannot benefit from the impact of the blockchain?