Digital Currency Vs Cryptocurrency – What's The Difference?

Finance Minister Nirmala Sitharaman, during her 2022 Budget speech, informed that the Reserve Bank of India (RBI) would be moving out of its Digital Currency, there has been a lot of discussion about what exactly a Digital Currency is and how will it vary from cryptocurrencies such as Bitcoin, Dogecoin and other famous tokens.

If you’ve been wondering how Digital Currency will vary from Cryptocurrency then this article will help you know everything about these two forms of currencies. Let’s start by explaining them first.

Digital Currency – is the digital form of fiat currency that you have around in your wallet or withdraw from an ATM. It’s the exact currency that is backed by an authority, the Reserve Bank of India case of Indian currency, and can be traded for actual currency if and when it is scheduled to be launched in 2023.

Cryptocurrency – is not funded by a central figure but emanates its purchasing capacity from its community of users. Technically, they are parts of code designed by ‘mining’ that are managed through a digital catalogue called a blockchain to guarantee clarity at each step of its journey. Although coins like Bitcoin and Ethereum have many benefits when it reaches NFTs and the upcoming metaverse, they cannot be used outside of blockchain as these are digital purchases that can be sold but not used as a legal tender in India.

Now that we understand them, here are five main differences between Digital Currency and Cryptocurrency.

Centralization

The major difference between Digital Currency and Cryptocurrency is the question of who has power over the economic worth of your coins. On the subject of Digital Currency, it would be the Reserve Bank in India or Fed in the US along with the state, banks, and other middlemen, all of whom would have to come together to set the importance of the currency in question. This is why you would read of the Turkish Lira devaluation by over 40% in 2021 or the collapse of financial systems in Myanmar and Afghanistan once the central administration is left powerless.

Cryptocurrency, on the other hand, pursues a transparent process right from mining to ownership to the transfer of crypto assets. Its significance is also independent of central banking authorities and regional geopolitical issues.

Encryption

Once again, Cryptocurrency trumps Digital Currency when it reaches encryption. Digital coins are essentially e-cash that doesn’t need any special indigenous techniques to encrypt them. Cryptocurrencies, on the other hand, are stored on a blockchain and the coins themselves are stored in ‘wallets’ that show a much higher degree of cyber security.

Also, selecting the right Cryptocurrency dealings that deliver the best safety elements and a broad range of currencies to transact with, is the primary need to transact using cryptos. WazirX is one such crypto exchange that does the job reliably and one that we highly suggest getting beginning on your crypto journey.

Transparency

The major advocates for Cryptocurrency will cite the clarity afforded by the medium. Every detail regarding Cryptocurrency transactions is in the public domain appreciation of the existence of a decentralized ledger that records all the blockchain details. With Digital Currency, only the banking traditions along with the sender and receiver are involved in the transaction involved. In case of dispute over any asset, cryptocurrencies are easier to handle as the records are there for everyone involved to see, whereas digital coins could involve bureaucratic hurdles and other issues in case of any conflict. This decentralization of information is, in fact, one of the driving forces leading to the adoption of cryptocurrencies across the world.

Stability

Digital Currency is usually sturdy and also moderately comfortable to work with, thanks to having wider approval in the global market. Digital Currency, being the ruling version of approved currency, is sold and understood by an extensive majority of the people. This, in turn, causes it more stable when reaching a new technology such as Cryptocurrency that has begun acquiring attraction but isn’t mainstream yet. Added to that, the price volatility of cryptocurrencies is another factor that hampers its stability even as new tech and components suggest that it is slowly but steadily gaining traction all around.

Legality

Most nations, including India, are now taking a look at the legality and approval of cryptocurrencies. Since these aren’t backed by any governing institution, most traditional frameworks don’t assign any value to them.

However, the swift advancement in the number of depositors and different use cases of blockchain today and the upcoming metaverse, where the only mode of payment remains cryptocurrencies, indicates that some kind of discussion around the legality of cryptocurrencies is bound to occur sooner than later. For now, countries around the world are firm in backing their fiat currencies. You can also contact PerfectionGeeks Technologies.