Sunday, August 1

Digital currency, virtual money or cryptocurrency? Know their differences | Digital Trends Spanish

Digital currency or cryptocurrency? Although they are often used synonymously, in the strict sense of the term there are profound differences between the two. Especially today, understanding the differences between digital currency, virtual money and cryptocurrency It is key to making the right decisions.

You will be interested in:

What do the dollar, the euro or the yen have in common? What are a type of money fiat or by decree. They are so called because they only need the support of a State that legitimizes their circulation and they are recognized throughout the world to facilitate exchange. Unlike what happened at the beginning of the last century, its value is not backed by gold, but this is acquired from the confidence that the market has in its issuer.

However, the dominance of these currencies has recently been threatened by other players: cryptocurrencies and, to a much lesser extent, virtual money. Next, we review the main characteristics of digital currencies, virtual money and cryptocurrencies so that you know their differences.

Digital currency (CBDC)


In general, digital currencies are those issued and backed by the central banks of the countries, so they can be considered as legal tender. Known as CBDC, they are the electronic counterpart to physical notes and coins.

These are high security digital instruments. Like paper bills, they are a means of payment, a unit of account, and a store of value. In addition, each unit is identifiable to prevent counterfeiting. In this way they allow exchange between peers, are universal, anonymous and do not generate interest.

But being digital, they could incorporate some changes, such as restricting them to a certain group – as China does in its tests – some account-based transactions could be easily tracked and pay interest.

CBDCs are still in the early stages, but more than 80 percent of the world’s central banks have considered pushing them forward.

In 2020, the Bahamas implemented the sand dollar, an equivalent of the local dollar, however, the turning point came in April 2021, when China became the first major economy to launch tests with the e-CNY or digital yuan; in July 2021, the European Union gave the green light to the digital euro; while the US digital dollar began preliminary tests in May 2021.

Virtual currency

Another type is virtual currencies. The best example is golds or tokens of the game World of warcraft (WOW), whose value has even exceeded that of the US dollar. In simple terms, they are issued by a developer and can only be used by members of the same virtual community.

Virtual currencies can be closed or fictitious when they have no connection to the real economy, as in the case of WoW. That is, they only serve to operate within the community itself.

But they can also have a real life application. Through actions, users of a community accumulate coins —or rewards—, which they use to buy products within the issuer of these coins, such as Amazon Coins, Microsoft Points, Nintendo Points, Facebook Credits, among other.

Cryptocurrencies (or convertible virtual currencies)

A stamp representing bitcoin
A third type is cryptocurrencies. Although strictly speaking they are a type of virtual currency, one of their greatest characteristics is their decentralized character.

Technology-based blockchain or chain of blocks that records and validates transactions, among its main exponents are bitcoin and ether.

Cryptocurrencies are attractive because they are unrelated to the decisions of the authorities of a country or entity: there is no body that issues them, but in theory anyone can “mine” them. In addition, cryptocurrencies make it possible to hide the identity of users, which guarantees anonymity of transactions.

Their main drawback is their extreme volatility due to the fact that they are not anchored to any security or body. Proof of this have been the variations it has experienced from the zigzagging statements of Tesla CEO Elon Musk.

To deal with this problem, initiatives have been developed aimed at creating stable coins or stable coins, a type of cryptoasset whose value is tied to an external anchor. Most are still in the experimental phase.

Editor’s Recommendations

var stage = decodeURIComponent(0); var options = JSON.parse(decodeURIComponent('')); var allOptions = {};

if (stage > 0 && window.DTOptions) { allOptions = window.DTOptions.getAll();

Object.keys(options).forEach(function(groupK) { if (options[groupK] && typeof options[groupK] === 'object') { Object.keys(options[groupK]).forEach(function(k) { if (!allOptions[groupK] || typeof allOptions[groupK] !== 'object') { allOptions[groupK] = {}; }

allOptions[groupK][k] = options[groupK][k]; }); } }); } else { allOptions = options; }

var getAll = function () { return allOptions; };

var get = function (key, group, def) { key = key || ''; group = group || decodeURIComponent('qnqb92BhrzmkpqGx'); def = (typeof def !== 'undefined') ? def : null;

if (typeof allOptions[group] !== 'undefined') { if (key && typeof allOptions[group][key] !== 'undefined') { return allOptions[group][key]; } }

return def; };

var set = function (key, group, data) { key = key || ''; group = group || decodeURIComponent('qnqb92BhrzmkpqGx'); data = data || null;

if (key) { if (typeof allOptions[group] === 'undefined') { allOptions[group] = {}; }

allOptions[group][key] = data; } };

var del = function (key, group) { key = key || ''; group = group || decodeURIComponent('qnqb92BhrzmkpqGx');

if (typeof allOptions[group] !== 'undefined') { if (key && typeof allOptions[group][key] !== 'undefined') { allOptions[group][key] = null; } } };

window.DTOptions = { get: get, getAll: getAll, set: set, del: del, }; }());

Leave a Reply

Your email address will not be published. Required fields are marked *