1. What is the digital currency?
Digital money exists only in a virtual format, they do not have a physical equivalent in the real world. Nevertheless, they have all the characteristics of traditional money. Like classical money, they can be received, translated or exchanged for another currency. They can also pay for goods and services - for example, mobile communications, the Internet, bills in online stores and so on.
The digital currency does not have geographic or political boundaries: money from the electronic wallet can be sent from anywhere and anywhere.
In fact, digital bills and purses can be regarded as bank deposits.
2. What is a crypto currency?
Crypto currency is a kind of digital currency. It is an asset that is used as a means of exchange and is considered reliable, because it is based on cryptography.
One of the main goals of cryptography is the safe exchange of data. Cryptography creates and analyzes algorithms and protocols so that the transmitted information is not altered or destroyed by third parties. Cryptography combines the principles of various sciences, the main one of which is mathematics. It provides accuracy and reliability of algorithms and protocols.
Crypto-currency technologies use blocking and distributed registry. Due to this, no controller can control what is happening on the network, and so it happens in the entire user space.
3. How do they differ from each other?
Despite the fact that the crypto currency is a type of digital currency, there are fundamental differences between them.
Structure
The digital currency is centralized: there is a certain group of people and a network of computers that control network transactions.
Crypto-currency, in turn, is decentralized, and the rules are established by the majority of members of the crypto community.
Anonymity
To use the digital currency, you need to identify the user - the system requires you to upload a photo and certain documents issued by government agencies.
To buy, invest and any other manipulation of the crypto currency, nothing is required. However, crypto-currencies do not provide complete anonymity. Despite the fact that addresses do not contain any confidential information - names, registration, etc., - every transaction is registered, and senders and recipients are well known. Thus, any transaction can be tracked.
Transparency
The digital currency is not transparent. You can not choose a purse address and see all money orders, this information is confidential.
Crypto currency, on the contrary, is transparent - you can see the list of transactions of any user, since all revenue streams are placed in a public chain.
Transaction management
The digital currency system provides for the existence of a central body that deals with problem solving. He can cancel or freeze the transaction at the request of the participant or authorities, as well as on suspicion of fraud or money laundering.
Crypto currency is regulated by the community. It is highly unlikely that users will approve changes in the blockbuster, although rare precedents have happened - for example, breaking in DAO. However, it was a large sum, and the decision was not unanimous.
4. What are the strengths and weaknesses of digital money?
In a centralized system, there is a group of people responsible for the state of the entire system. If an error occurred during the transaction, you can make a request to the company and expect that everything will be fixed. In a decentralized system, this is impossible.
On the other hand, centralized networks store a lot of confidential information about users. These data may be lost, stolen or transferred to law enforcement agencies at the request of the court. In decentralized networks, there are no such problems. The same goes for canceling a transaction. If the system can be canceled, it is also possible to make changes to the transaction, which scammers are actively using.
5. Is it possible to combine the advantages of both currencies?
The introduction of centralized systems in a decentralized network can turn out to be a success.
More than 2 billion people do not have bank accounts and, accordingly, do not use banking services, Forbes reports. More than 5 billion people use mobile phones, and this number is growing rapidly. Thus, it is possible to introduce a banking system into a mobile network, so that more people use the services of banks.
Crypto-currency and lock-up will allow using all the benefits of cryptomir - transparency, security and decentralization. Digital money, in turn, will be provided by the supervisory authority, digital wallets and a set of rules.
