The progression in technology has seen many new concepts come to light about our daily lives. The money we spend has not been spared by this advancement. New forms of currency such as digital currency and cryptocurrency have emerged. But what exactly is the relationship between digital and cryptocurrency? In this post, we will be examining cryptocurrency vs digital currency.
What is Digital Currency?
To start with we define digital currency. Digital currency is a type of currency which is not available in physical form. It is only available in digital or electronic form. It is also called electronic currency, electronic money and digital money.
Digital currencies can be used to purchase goods and services. They also have all the intrinsic properties of physical currencies like being used for payments across borders.
With digital currencies, conversions are not needed for cross-border transactions. The only requirement is that both parties belong to the same network.
Cryptocurrencies are currencies with their basis in cryptography and P2P validation. They are decentralized with no backing government.
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Cryptocurrency vs Digital Currency
The term digital currency stands for all means of transactions/ tokens that are not physical. Hence, it contains types such as central bank digital currency (CBDC), virtual currencies and cryptocurrencies.
Central Bank Digital Currency (CBDC): CBDC is a form of digital currency that is centralized and created by a recognized regulatory authority. Examples of countries that have conceptualized CBDCs are England, Sweden, and Uruguay.
Virtual Currency: This is a form of digital currency that does not have the backing of a regulatory authority. It may be centralized or decentralized.
Cryptocurrency: A cryptocurrency is a form of digital currency that uses cryptography to secure and verify transactions. It is also used to manage and control the creation of new currency units.
Therefore in conclusion, cryptocurrency is a subset of digital currency. All cryptocurrency are digital currency but not all digital currency are cryptocurrency.
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