What are the differences between digital currencies and cryptocurrencies? AtoZ Markets team addresses in this guide the differences between digital currencies, cryptos and encrypted currencies.
July 23, 2019 | AtoZ Markets – Digital coin is money in the form of numbers. It has no material equivalent in the real world. But digital currencies have all the characteristics of traditional money. Just as local money in any state, you can obtain, transfer or exchange it for other currencies. You can use it to pay for goods and services. Such as topping up your phone and Internet accounts, buying online, paying for bills and more. Digital currencies have no geographical or political boundaries. Users of digital currencies send transactions from anywhere to any point in the world.
Encrypted currencies or Cryptocurrency?
Encrypted currencies or Cryptocurrency is an asset used as a means of exchange. It is reliable because it is based on a complex encrypted system based on cryptography. One of the basic objectives of cryptography is to make communication safe and protected. Also, it creates and analyzes algorithms and protocols that allow encryption of data so that no information is changed. Encryption is a combination of a large number of different sciences. The basic process of encryption through mathematics. Mathematics is responsible for the reliability of encrypted algorithms and protocols. Furthermore, Encrypted currencies or Cryptocurrencies have a system and a protocol called a blockage or a digitized accounting book. Thus, this means that no third authority controls all transactions, transfers, and transmissions in the network.
The basic differences between digital currencies and cryptocurrencies
Although, cryptocurrencies are a type of digital currency. There are some basic differences between the two:
- Structure: Digital currencies are centralized, whilst currencies and cryptocurrencies are not. There are a group of people and computers that regulate the status of transactions in the network. Based on distributed systems that manage transactions.
- Decentralised: Digital currencies require user identification. One will need to upload their personal photo, some documents issued by the public authorities, proof of the address, and other procedures. Also, buying, investing in or doing any other cryptocurrency-related operation does not require the same the digital currency needs. However, the encrypted currencies or Cryptocurrencies are not 100% anonymous. Although, the addresses of the wallet do not contain any confidential information. Also, the decentralized platform handles data such as name, address, etc., encrypted currency conversions. Also, the decentralized platform handles the tracking of the addresses of encrypted currency wallets.
- Transaction processing and remittance: Digital currencies have a central authority that handles all transactions and remittance issues. They may cancel or freeze transactions at the request of the participant. Cryptocurrencies are organized through a distributed system of computers called Peers or Nodes in a global network. This network has standardized, special programming on all computers. The Peers or Nodes must approve any changes in that programming. Also, it is highly unlikely that users will agree to Changes in that blockchain network.
Transparency matters and legal aspects
- Transparency: Digital currencies are not transparent. We cannot track the financial transactions of anyone. And we cannot see the remittances. This information remains confidential.
- Legal aspects: Most countries have some legal framework for digital currencies. Such as EU Directive 2009/110 / EC and Article 4A of the USC. In most countries, you do not find any status codes for encrypted currencies. However, the establishment of the legal framework for encrypted currencies is still in progress for many countries.