With so many different options to consider, it can be difficult to understand all the different technology. To make things more confusing, it is not uncommon for people to interchange terms and use terms incorrectly.
Two terms that are often used as synonyms for each other are cryptocurrency and digital currency. While there are some components of these two assets that have similarities, they are two different types of assets.
Digital Currency
Digital currency is based on the actual fiat currency of the county issuing the digital currency. It is the digital form of the physical money that is issued by the government or central bank. Unlike cryptocurrency, digital currency is regulated by a central bank or the government.
This means the digital currency is the same value as fiat currency. Typically, the digital currency is used with non-contact transactions using mobile phones, smartwatches, or other similar types of technology.
Cryptocurrency
Cryptocurrencies are sometimes called digital coins. This is a currency that is based on blockchain technology and is managed through decentralized ledgers and not through a government or central bank. Each transaction is recorded on the blockchain, which means the record is not only distributed across the network but there is also transparency that is effective in providing additional security.
The value of cryptocurrency is linked to supply and demand. This means cryptocurrency is more volatile. However, it also offers greater rewards for investors. Cryptocurrency is stored in digital wallets but offers encryption, which is not offered with digital currency.
