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Digital currency vs cryptos , What is the Difference ?

The Centre’s plans to ban cryptocurrencies but also plan tp introduce an functionary, digital currency. There's some confusion on the differences between the two – There are at least six crucial dissonances between authorized digital currency and cryptocurrency. While all cryptocurrencies could be considered digital currencies, not all digital currencies have to be authorized sovereign backed currencies. For case, the virtual currency used in say, an online game, is also a form of digital currency, But not backed by a central bank but governed by the game generators.

Apart from that, the other crucial differences are .

Issuing authority -

Offical digital currencies are issued by the central banks of a nation- state that oversees the banking system in that country.For Example , in India, like regular Paper currency, it'll be the Reserve Bank of India that will issue digital currency, when mandated by the government. Also, in the US, it'll be the Federal Reserve. However, in the case of cryptocurrency, there's no single issuing authority. Cryptocurrencies are generally developed by teams as a piece of code used for issuance through‘mining’.

Creation, as well as use-

is maintained through a distributed ledger.They transmit value across a decentralised network of users.Therefore while digital currencies are centralised, cryptocurrencies are de-centralised. Encryption and underpinning tech There's little encryption that happens in official digital currency and involves no special cybersecurity measures.

Anyone with a regular online bank account, for instance, can store and use digital currencies.

Consider this as a form of e-cash. However, blockchain is the underlying technology used in most cryptocurrencies and, generally, these are stored in‘ wallets’with a high degree of cyber security. While it's true that some of the crypto wallets have been hacked, generally the degree of cyber defensive measures taken beforehand are more in the case of cryptocurrencies.

Stability and change in the rates -

While official digital currencies are largely stable in value and therefore easy to enjoy and use in the global market, cryptocurrencies can wildly swing in value.

In a single day, the price of a unit of cryptocurrency can vary as much as 50 to 70 per cent.

Therefore, fiat digital currencies give more stability, while cryptocurrencies are known for their high degree of volatility and consequent threat.

Transparency -One crucial area where cryptos score is transparency. In this case, the entire history of transactions between two parties can be seen as it's done on blockchain and is immutable (can not be changed). However, in the case of central bank- issued digital currency, it's the centralised issuing authority that decides how much information it wants to share.

The receiver or sender of digital currency will receive information only related to that transaction.

Cost of sale-

In the case of digital currency, the issuing authority or the centralised regulator can levy transaction fees each time the currency is debited or credited. The blockchain technology used in cryptocurrencies ensures that similar charges are minimised as there's no commission for third parties. This is especially useful when cryptocurrency is used to buy or sell, high- value assets. Legal frame In most countries, there's some kind of legal frame and protection around official digital currencies. However, when it comes to cryptocurrencies, that isn't the case; in several parts of the world, it's still a grey area. Except for El Salvador, which decided to use Bitcoin ( presently the most popular cryptocurrency) as legal tender, cryptocurrencies are in unchartered territory with their legal status not clearly defined.


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