As people continuously seek convenience, the financial world has been greatly affected by the desire to make everything easier. Now, we no longer have to wait in line to do bank deposits or cashouts. The word "digital money" is conceived, and as technology incessantly evolves, digital wallets have also started to develop even better over the past decades. Even governments all over the world support the use of digital money and encourage people to switch from traditional wallets for convenience.

The increasing popularity of cryptocurrency has even opened doors and opportunities for digital wallets to flourish. More and more people began using digital wallets to store digital currency as well as cryptocurrency.

Wait. Hold on a second. Are these two different things?

Yes. You heard it right. Digital currency and cryptocurrency are totally different things. Oftentimes, we use these two terms interchangeably.

This article aims to discuss the similarities and differences between digital currency and cryptocurrency.

Definition. Digital currency is the virtual version or electronic form of fiat currency that is issued and backed by the government. It can be used for contactless financial transactions such as deposits, cashouts or electronic transfers from a digital wallet to another person's account. Its value is exactly the same as fiat money. Withdrawing money from an ATM turns the digital currency into liquid cash.

On the other hand, cryptocurrency is a type of digital currency that is decentralised by nature and uses cryptography for enhanced security. Cryptocurrency utilises the blockchain technology that serves as a public ledger allowing all data and transactions to be publicly stored and recorded. It works as a medium of exchange and can also be used in purchasing goods and services. Unlike digital currency, cryptocurrency is not government-issued or regulated. Bitcoin, which was invented in 2009, is the first decentralised cryptocurrency. Bitcoin and cryptocurrency are produced through mining. Complicated algorithms are solved using computers or devices in exchange for tokens convertible to crypto coins. The mining powers of computer users worldwide are combined, which help increase cryptocurrency's valuation.

Examples of Cryptocurrencies

  • Bitcoin - Created in 2009, Bitcoin is considered the pioneer of all cryptocurrencies in the market. Other coins that are not Bitcoin are called alternative coins or altcoins. It was created by an individual or group of individuals under the pseudonym Satoshi Nakamoto in 2008 but was first launched in January 2009. The concept of blockchain technology - a decentralised public ledger that records all data and transactions originated from Bitcoin. Other cryptocurrencies have designed their own version based on Bitcoin’s blockchain.
  • Ethereum - Known as the second-largest cryptocurrency next to Bitcoin. It also utilises blockchain-based technology and is known for its smart contract feature that allows transactions and exchanges without the need for a middle man.
  • Litecoin - Another well-known cryptocurrency that uses a peer-to-peer network and lets you transact without intermediaries.
  • Tether - This is a popular stable coin - a cryptocurrency that is backed by fiat money. The aim of creating this cryptocurrency is to overcome volatility and offer stability. Its native coin is known as USDT. The ratio of its value is 1 USDT:1 US dollar.
fiat money.

For more cryptocurrencies, you can check Bitcoin Revolution.

Major Differences of Crypto vs Digital Currency

  1. As already stated above, digital currency is centralised. It is regulated by the central bank, while most cryptocurrencies are decentralised. They are not regulated by the government or any financial institutions. They operate without a central server and can carry out financial transactions even without a third party or intermediary.
  2. Cryptocurrency is known for transparency. The public ledger allows every user to record and view every transaction. On the other hand, digital currency is not transparent. All information related to the account must remain confidential and private at all times.
  3. Digital currency is governed by central authorities that provide assistance if you have problems or issues with the account. For instance, if there are possible fraud issues, they can freeze the account and provide a solution to the problem. On the other hand, cryptocurrencies are not governed by central authorities. Any existing issue will be addressed by respective communities.
  4. Digital currency does not use any encryption. However, you are required to create a strong password for security purposes. This will minimise the risk of online attacks such as hacking or theft. Cryptocurrency uses encryption for enhanced security. For you to be able to transact and trade cryptocurrency, you can check you must have a digital wallet that can be used to convert your digital currency into the corresponding value of fiat money.
  5. Digital currency is widely accepted compared to cryptocurrency. It is also known to have a more stable value. On the other hand, cryptocurrency is known to be highly volatile. Price fluctuation is very common, and you can hardly predict when the price goes up or down. Thousands of merchants and companies now accept bitcoins as a form of payment, but some are still sceptical about adopting this form of currency.