The differences between digital currencies and cryptocurrencies is beyond understanding to average folks. Let’s clarify some things that are hard to understand. Few things may sound too technical to understand but this is the simplest way to understand the major difference between a digital currency and traditional currency. Slowly but truly you will definitely learn all about technical analysis.
Well we are already dealing in a world of digital currencies. In fact in many countries including Canada, USA and Europe, no longer even use pennies. It’s too expensive to mint them. So slowly but truly that hard physical currency is disappearing.
Evolution of Digital Currency
We had the evolution of paper currency, then credit cards appeared and now we even have wiring and paypal. So the digital currency is being accepted. Now why is something a digital currency versus a cryptocurrency? What’s the main difference?
How Digital Currencies Work?
Well the digital currencies are regulated by the federal banks of the country. So the U.S. bank is going to control the U.S. dollar, the bank of Canada, the Canadian dollar and so on. So they are tracking all of this currency that’s crossing the borders. You know how many times if you transfer an amount larger than ten thousand dollars they start to ask questions.
In fact even over nine thousand dollars many times they will ask you what is the purpose of this transfer, why are you transferring it or any sort of cross-border transfer? They will usually ask you and say why are you transferring this money which then brings us to cryptocurrency.
How Cryptocurrencies Work?
Cryptocurrency is decentralized. There is no central bank that is following this currency. so it goes through an encryption process and it’s all encryption between peer-to-peer for the transfers.
That’s the only way to track it and you store this digital currency in a crypto wallet. The cryptocurrency in a crypto wallet— it is a form of digital currency but again it’s not regulated which is why it’s a crypto currency. That’s part of the reason why many people are skeptical of cryptocurrencies is because they aren’t being regulated by anybody. Some think that this is a perfect way for people to launder money because it does not go through a central bank.