What is Fiat Currency?
Before getting started with digital currency and cryptocurrency, let’s first understand what fiat currency is. It is a currency that the government establishes as money. This type of payment is completely controlled and regulated by the government and does not have an intrinsic value. As long as the government maintains its value, fiat money will have its value and can be used for all purposes that come under that government. Any decision or change in the regulations made by the government for Fiat money will have a massive impact on the country’s economy.
What are digital currencies?
Any money that exists in the digital form is called digital currency. In the real world, money has no physical equivalent. However, digital currency possesses all the characteristics that traditional money has. Similar to fiat money, one can quickly transfer or exchange it for other currencies. It can be used to purchase any goods and services from mobile and Internet communication to online stores. Transaction made using digital currencies may not remain restricted to geographical or political borders. It can be sent from any location to any other part of the world. Digital accounts or wallets are referred to as bank deposits as well.
What are cryptocurrencies?
One can consider cryptocurrencies a variety of digital currencies. These are assets that can be used for exchanging. As it is based on cryptography, experts believe it to be extremely reliable. This is the main reason why cryptography is used in cryptocurrencies. It produces and checks algorithms and regulations so that the recorded data can never be changed or manipulated. In simpler terms, Cryptography is a vast and complex combination of different sciences, whose basics are math’s. The math’s determines the severity and dependability of algorithms and regulations.
Cryptocurrencies are based on blockchain that is a decentralized ledger. This means there is an authority that has control over cryptocurrency in any way. There are various trading apps available online, like https://crypto-revolution.app/ that are entirely safe for people to trade. Most people are switching from trading in stocks and bonds to cryptocurrencies due to the high returns.
What are the primary differences between digital currency and cryptocurrency?
Despite cryptocurrency being a variant of digital currency, there are a few things that differentiate them:
Cryptocurrencies are not centralized currencies. This means, unlike digital currencies controlled by a group of people and computers, the majority of the community make the regulations in cryptocurrencies.
While using digital currencies, user identification is required. This is a long process where one has to upload a picture and a few required documents, etc. However, this is not the case for cryptocurrencies. One can easily buy, invest, and mine cryptocurrencies without any such regulations. But, using cryptocurrencies is not anonymous. Although confidential information like name, address, etc., are not required while using cryptocurrencies, all transactions are recorded, and both the parties are publicly known, and the transaction can be tracked.
Digital currencies do not maintain transparency. One cannot select an address of the wallet and check all the transactions that took place. The information remains completely confidential. On the other hand, all purchases made using cryptocurrencies are transparent. It is a public platform where people can check any user purchases as revenue streams are in a public chain.
Manipulation in transactions
There is an authority that deals with issues regarding digital currencies. If the authority wants, purchases can be canceled or frozen at any point in time. However, that is not the case with cryptocurrencies as they are community regulated. Such changes in blockchain are implausible. However, there has been one or two cases where changes were made.
The Legal aspects
When it comes to digital currencies, most countries have a few rules and regulations that everyone needs to follow. For instance, In the European Union, there is the Directive 2009/110/EC, or in the US, there is Article 4A of the Uniform Commercial Code. However, when it comes to cryptocurrencies, things are different. Most countries do not have a defined official status for cryptocurrencies. They are still working on a legal framework that can help in adopting the process.