A Beginner’s Guide on What’s the Difference Between Cryptocurrencies and Digital Currencies
For the uninitiated, the terms cryptocurrency and digital currency sound pretty much the same. Thus, they are often used interchangeably, often without regard to the usage’s accuracy. It pays to, once and for all, settle the score. But first, let’s give a brief rundown on how cryptocurrency and digital currency came to be.
Cryptocurrency: A Short History
Pre-Bitcoin years fall between 1998 and 2009. Although there had been attempts to create encrypted ledgers for online currencies, they never fully materialized. These experiments included Bit Gold and B-Money.
In 2008, a certain Satoshi Nakamoto authored a paper called Bitcoin – A Peer to Peer Electronic Cash System. The paper discussed all things cryptography and made the rounds online after being sent to a mailing list discussion about the subject. Nakamoto would later reveal himself as Australian entrepreneur Craig Wright.
Bitcoin officially launched in 2009, with the software becoming available to the public for the first time. The process of mining created the pioneer cryptocurrency of Bitcoin. Consequently, the blockchain technology came into existence to allow the recording and verification of Bitcoin transactions.
In 2010, the first Bitcoin trade occurred, finally jumpstarting the cryptocurrency’s valuation. The trade involved 10,000 bitcoins for two pizzas.
Fast forward to the present, more than 18 million bitcoins are in circulation. That’s 3 million short of hitting the maximum mining capacity for the cryptocurrency. Yes, Bitcoin has become as valuable as finite gold. Suppose you held on to your bitcoins, which had a value of $1,000 from the time the cryptocurrency was introduced, and you decide to sell now, you could be an instant multi-millionaire.
Outside Bitcoin, thousands of cryptocurrencies are in existence and being traded in the market. Altogether, cryptocurrencies have a market capitalization of approximately $201 billion.
Digital Currency: How It Came to Be
The 1980s saw the computer boom, with PCs slowly crawling into residences after years of limited use in workplaces. The trend triggered the emergence of the cypherpunk movement. The ideology behind the movement was to reject state surveillance, which cypherpunk supporters considered the unavoidable result of computerization.
To protect people’s privacy online, a programmer named Eric Hughes authored the Cypherpunk Manifesto. The text outlined the movement’s desire for safe and discreet digital communication and financial transactions.
In 1983, American cryptographer David Chaum wrote and published the paper called Blind Signatures for Untraceable Payments. It became the blueprint for his project DigiCash, the predecessor of today’s digital currencies.
After DigiCash, B-money followed suit, which worked pretty much like bitcoins, employing a publicly accessible ledger for transaction transparency. Now, new technologies such as the Bitcoin SV exist with the hopes of further streamlining digital financial transactions.
What Makes Cryptocurrency Different from Digital Currency?
Anyone can argue that these are all just semantics—and there’s a grain of truth to that. After all, most experts would agree that all cryptocurrencies are digital currencies. So why do we even need to dissect?
Think of it as a project in deconstruction. As they say, the devil is in the detail.
Cryptocurrencies, such as Bitcoin SV, afford you more privacy. Cryptos use an encrypted system that won’t compromise any of your personal data, allowing top-notch protection against the risk of counterfeit. To participate in Bitcoin transactions, you do not need to divulge your given name or present identification. By contrast, the same cannot be said if you open a PayPal account for digital transactions.
While cryptocurrency traders trade anonymously, the details of these financial transactions are accessible to all participants. This way, any transaction that tries to disrupt the system’s existing protocols can be flagged easily. The same level of transparency is not present in transactions via digital currency platforms like Venmo. You won’t know what your friends’ last Venmo purchase is unless you asked for the information and they willingly give you the answer.
Digital currencies still exist within the umbrella of traditional banking systems. There’s always a third party that oversees these transactions as a centralized regulatory body. As for cryptocurrencies, decentralization is the order of the day. There’s no financial Big Brother overseeing the whole system, although all participants have control in monitoring approved protocols.
- Legal interference
Most digital currencies are state-sanctioned. Meanwhile, governments have yet to gain full control of cryptocurrencies.
While this list puts cryptocurrency at an advantage, it cannot undermine the equally crucial aspect of digital currency in online financial transactions. Combining the best elements of these two systems might be ideal. For example, after reaping the rewards of excellent Bitcoin SV performance, you could trade for PayPal USD. Such a move is most convenient when you need to complete financial transactions where cryptocurrency’s not recognized.
Bitcoin SV Performance
Now that you know the key differences between digital currencies and cryptocurrencies, let’s discuss a cryptocurrency option you should consider. We’re talking about Bitcoin SV.
Bitcoin SV performance has been promising. From 2019 to 2020, the cryptocurrency saw a 147.50 percent increase in value. That’s more than a hundred percent higher than the appreciation enjoyed by its main competitors, including BTC (51.7 percent), Bitcoin Gold (21.8 percent), and Ethereum (ETH), which actually saw a deficit.
If you’re looking to invest in cryptocurrency, Bitcoin SV could be your best choice for now. It is known for its commitment to the original protocols advanced in the Satoshi Nakamoto text. That means your initial foray into the system is as pure as it gets.
E-commerce has grown exponentially as more and more people favor online financial transactions. Now, more than ever, there’s a pressing need for data and privacy protection. As a result, most people could be eyeing crypto and digital currencies as a viable alternative to bank and state-sanctioned means of moving money.
If you are nurturing an interest in cryptocurrencies like the Bitcoin SV, by all means, follow through with it. But make sure you learn as much as you can about these subjects before you make the leap and invest. Done right, it could be your ticket to the kind of financial independence that you long for.