Difference Between Cryptocurrency and Digital Currency

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14 May 2025 Updated on  Обновлено   27 May 2025

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Cryptocurrency is often confused with digital currency, but this is a mistake, as there are fundamental differences between them. In this article, we will find out the difference, as well as combine their advantages for the benefit of the financial sector.

Digital currency is money used for online payments. It exists only in digital form and has no real equivalent. But they have all the characteristics of fiat money: they can be sent, received, exchanged, cashed out. They can be used to pay for goods in online shops, pay for utilities, telecommunication, internet, fines, etc. Money from digital wallets can be sent and received throughout the country.

And cryptocurrency is a type of digital currency that is considered a more secure tool for data exchange due to cryptography. Cryptography ensures the accuracy of the protocols and algorithms created and analysed in order to transfer data without alteration or destruction. Cryptocurrencies are based on blockchain technology. All transactions in its network are not controlled by any regulatory authorities.

Differences between types of currencies

Разница между криптовалютой и цифровой валютой

Although cryptocurrency is a type of digital currency, there are significant differences between them:

  • Structure. The digital currency is centralized; transactions are controlled by servers belonging to a group of people in such a system. A cryptocurrency is decentralized within the structure; the rules are dictated by the majority of participants in a crypto community.
  • Anonymity. It’s required to go through identification, presenting the scanned identity papers to the system and waiting for their verification in order to use digital currency. Cryptocurrency use doesn’t require such actions. Though cryptocurrency also can’t provide complete anonymity since the transactions are recorded and tracked in them.
  • Transparency. Digital currency is non-transparent, it is impossible to see information about money transfers of other people on their wallet address. Cryptocurrency is transparent and transactions of the users are entered into a public blockchain.
  • Transaction management. Each digital currency system has a central authority that deals with problem solving, transaction cancelling in contentious situations, wallet freezing at the authorities’ request. Cryptocurrency is controlled by a crypto community approving changes in the ledger.
  • Legal framework. Most states have developed digital currencies’ legal statuses while defining them in the legislation long ago. As for the cryptocurrencies, just a few developed countries have created a legal framework while the rest of the world has not yet determined the official cryptocurrency status.

Combining benefits

cryptocurrency

The centralized systems implementation into a decentralized network could be successful. More than two billion people neither have bank accounts nor use their services worldwide while more than five billion people use mobile communications. The number of bank customers will significantly increase if it becomes possible to implement the banking system into mobile networks. Cryptocurrency and blockchain will provide people with security and transparency via decentralization. Digital money at the same time will provide the governing body with the rules.

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