Digital currencies are money used on the Internet.
Digital currency exists only in digital form. He has no physical equivalent in the real world. However, it has all the characteristics of the traditional currency. Like traditional fiduciary money, you can get it, transfer it or exchange it for another currency. You can use it to pay for goods and services such as mobile and Internet communications, online stores and others. Digital currencies have no geographic or political boundaries; Transactions can be sent from anywhere and received anywhere in the world.
In fact, digital accounts and portfolios can be considered bank deposits.
- What are cryptocurrencies?
Cryptographic currencies are a variety of digital currencies.
The cryptocurrency is an asset used as a means of exchange. It is considered reliable because it is based on cryptography.
One of the main objectives of cryptography is communication and communication security. Create and analyze algorithms and protocols so that no information is modified or interrupted during the conversation by third parties. Cryptography is a mixture of many different sciences, with mathematics as a basis. It is a calculation that combines severity and reliability with algorithms and protocols.
Cryptographic currencies use Blockchain and a large decentralized book. This means that no supervisory authority controls all the actions of the network. This is available to all users.
- What are the core differences between the two?
Although cryptocurrency is a type of digital currency, there are some fundamental differences.
Structure Digital currencies are centralized; A group of people and computers regulate the status of transactions on the network. Crypto-currencies are decentralized and regulations are established by the majority of the community.
Anonymity Digital currencies require an identification of the user. You must upload a photo of yourself and some documents from the public authorities. Buying, investing and any other process using cryptocurrencies does not require that. However, crypto-currencies are not completely anonymous. Although addresses do not contain confidential information such as name, residential address, etc., each transaction is recorded, and senders and recipients are publicly known. As a result, all transactions are tracked.
Transparency Digital currencies are not transparent. You can not choose the address of the wallet and see all money transfers. This information is confidential. Crypto-currencies are transparent. Everyone can see the transactions of any user, since all sources of revenue are placed in a public channel.
Transaction Manipulation Digital currencies have a central authority that deals with problems. You can cancel or freeze transactions at the request of the participant or the authorities, or if there is suspicion of fraud or money laundering. Crypto-currencies are regulated by the community. It is highly unlikely that users will approve changes to the Blockchain, although there are precedents such as piracy of The DAO. However, the amount was important and the decision uncertain.
Judicial aspects. Most countries have a legal framework for digital currencies, namely Directive 2009/110 / EC in the European Union or Article 4A of the Uniform Commercial Code in the United States. We can not say the same about cryptocurrencies for the moment. In most countries, its official status is undefined. The establishment of the legal framework is only in the process.
- What are the strengths and weaknesses of digital money?
Most distinctions can be considered both advantages and disadvantages.
In a centralized system, there is a group of people responsible for the state of the system as a whole. If you make a mistake in a transaction, you can send a request to the company and have the result. You can not do that in the decentralized system. On the other hand, centralized networks maintain a large amount of confidential information about users. These data can be lost, pirated or transferred to the police at the request of the court. Decentralized networks do not have these problems. The same happens with the cancellation of a transaction. If the system is revocable, you can modify a transaction. At the same time, it opens the door to fraudulent activities.
- Is it possible to combine the benefits of both?
The adoption of centralized systems for the decentralized network could work.
According to Forbes, more than two million people do not have access to banking services or access to banking services. More than five million people use a mobile phone and this number is growing rapidly. Therefore, the banking system can be implemented in the mobile network to provide services to more people. By using cryptocurrency and Blockchain, you can enjoy all the benefits of transparency, security and decentralization. With digital currency, you get a control organ, multiple digital wallets and a regulatory base.
Telcoin is one of the examples of the combination of the two. The main idea is to combine mobile phone companies around the world with the banking system. The banking system is represented by the symbiosis of digital currency and a new cryptocurrency, which will offer different services, such as mobile money, prepaid credit and postpaid billing platforms.