Monday, September 20, 2021
Finance

The Differences Between Digital Currencies & Cryptocurrencies

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We are slowly moving away to become a cashless society, which has seen digital currencies becoming increasingly used in our everyday lives. Cryptocurrency is also increasing in popularity, with the most popular product, Bitcoin, achieving record highs in 2021. However, there are some significant differences between digital currencies and cryptocurrencies that you may not know unless you are knowledgeable in this area. Below are some of these differences so you can tell them apart, and it may help you decide whether you want to invest in crypto or not.

What Is A Digital Currency?

A simple way to explain digital currency is that it is any form of currency primarily traded or used in an electronic format. You manage, store, and exchange money using a computer or Smartphone, and cryptocurrencies are a form of digital currency. However, most digital currencies that are not cryptocurrency are issued and controlled by central banks, which strictly control the currency. Cryptocurrencies such as Bitcoin are mined electronically, whereas a central bank will issue digital currency without mining it.

What Is A Cryptocurrency?

As mentioned, cryptocurrencies are forms of digital currency, but they are different from most other digital currencies available. A typical digital currency will see its value pegged to the value of the traditional currency, so $1 of crypto is worth the same as a $1 note. The value of your currency goes up and down depending on the exchange rate, which is where cryptocurrencies are different from traditional digital currencies. Cryptocurrencies work more in line with the stock market, as supply and demand increase or decreases their value. With cryptocurrencies such as Bitcoin, there are only a finite number of coins available, and they must be mined, which is a time-consuming and resource-intensive process. Unlike with a digital currency, where a central bank can create more out of thin air, you cannot do this with most cryptocurrencies.

Trading The Different Currencies

With traditional digital currencies, you can trade them easily, and all you need to do is have a bank account with internet banking. However, with cryptocurrencies, you need a secure digital wallet, such as Qoin, to allow you to buy and sell the currency with ease. There are many different types of digital wallets that you can use, and there are pros and cons to each of them. Ultimately it will come down to your personal preference as to which one is best for you. Transactions are almost instantaneous, so you can make a transfer or receive funds quickly without having to wait for them to clear for days in your bank. You also have the added benefit of not dealing with the exchange rate, as the price of cryptocurrencies is the same worldwide.

The Currencies Of The Future

With digital currencies becoming increasingly common worldwide, you can stick with traditional ones, or you can decide to opt for crypto ones as well. More retailers are starting to accept Bitcoin and other cryptocurrencies, making it easier to use them in your everyday life. Large companies such as Tesla and Microsoft accept Bitcoin as payment, which will become increasingly more common in the future. Digital currencies are here to stay, as are cryptocurrencies, so you may wish to consider investing in them, which could give you a nice nest egg for your future if you invest at the correct time.