Digital currencies and cryptocurrencies. What's the difference?

For many years, we pay utility bills and put money on the phone via the Internet. But the moment of the digitalization of money has passed imperceptibly. It is almost impossible to remember what the world was like before PayPal, Webmoney or Yandex.Money. Technology took a step further, and in our disposal there was an anonymous, fast and encrypted by the cryptography money. We sincerely hope that in ten years nobody will remember what the world was like before the cryptocurrency. Let's try to understand whether there is between digital money and cryptocurrency is the fundamental difference. Can they coexist together?

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What is digital currency?

Source: medium.com

Digital currency is money for the Internet.

The Digital money exists only in digital form. They have no physical equivalent in the real world. Nevertheless, they have all the characteristics of traditional money. As the classic Fiat money, they can obtain, transfer, or exchange to another currency. They can pay for goods and services, such as mobile communication and Internet, shopping in online stores and so on. Digital currencies do not have geographical or political boundaries — transaction can be submitted from anywhere and to anywhere in the world.

In fact, digital accounts and wallets can be considered as Bank deposits.

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What is cryptocurrency?

Source: medium.com

Cryptocurrency – a kind of digital money.

Bitcoin is an asset that is used as a medium of exchange. It is considered to be reliable because they are based on cryptography, one of the main tasks of which are communication and safety. It creates algorithms and protocols that ensure the safety of transmitted information and protect it from interference by third parties. Cryptography combines many different Sciences, but its Foundation is the mathematics. Mathematics gives the algorithms of professionalism and reliability.

Use the Cryptocurrency and decentralized registry. This means that online activities are not controlled by any oversight body. Control ensures all users.

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What are the main differences between them?

Although cryptocurrency is a type of digital currencies, among them there are fundamental differences.

Structure. Digital currency is centralized. There is a group of people and computers that regulate the transaction state in network. Cryptocurrency is decentralized, and regulated by most users.

Source: medium.com

Anonymity. Digital currency require . You need to upload your photos and any documents issued by public authorities. Buying, investing and any other actions with cryptocurrencies none of this require. However, the cryptocurrency, not really . Although addresses do not contain any confidential information on the type of the name or address of residence, each transaction – the sender and recipients publicly known. Thus all transactions .

Transparency. Digital currency is opaque. It is impossible to know about all money transfers to e-wallet. This information is confidential. Cryptocurrencies are also transparent. Anyone can see all transactions of any user, since all flows of funds are recorded in the public blockchain.

the Manipulation of transactions. digital currencies have a Central authority to deal with the problems. It can freeze the transaction at the request of the party or the authorities or suspicion of fraud or money laundering. Cryptocurrencies are regulated by the community. It is very unlikely that users approved the changes to the blockchain, although there have been precedents, such as hacking DAO. But then we were talking about a significant amount, but the decision was not clear.

Source: medium.com

Legal aspects. In most countries there is a regulatory framework for digital currencies, for example, Directive 2009/110/EC in the European Union or Article 4A of the Uniform commercial code in the United States. About cryptocurrency at the moment do not. In most countries, their official status is not defined. The regulatory framework only in the creation process.

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What are the strengths and weaknesses of digital money?

most of the differences can be simultaneously called and the advantages and disadvantages.

In a centralized system there is a group of people responsible for the condition of the entire system. If you make a mistake in a transaction, you can request the company, and hope for a successful outcome. In a decentralized system is impossible. On the other hand, centralized network store a lot of sensitive information about users. This data can be lost, hacked, or given to law enforcement at the request of the court. In decentralized networks, no such problems. The same applies to the cancellation of the transaction. If the system is reversible, the transaction can be changed. At the same time, it opens the door for fraudulent activity.

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is it Possible to combine their advantages?

Source: Fiveprime

Adaptation of the centralized systems to a decentralized network can be effective.

According to Forbes,more than 2 billion people have no access to banking services. Over 5 billion people use mobile phones, and this number is growing rapidly. Thus, it is possible to implement a banking system in a mobile network to provide services to a greater number of people. Cryptocurrency and the blockchain provide all the advantages of transparency, security and decentralization. Digital money gives the Supervisory authority, digital wallets and regulatory framework.

An Example of their combination is implemented in . The main idea is the combination of mobile companies in the world with the banking system. The latter is represented by the symbiosis of digital money, new cryptocurrency, and provides a variety of services by type of platform for mobile money, prepaid credit and poslepechatnogo billing. More data to search for .