What is the difference between a digital currency and a cryptocurrency?

 In addition to semantics, the fundamental differences between a full cryptocurrency and traditional fiat currencies made via digital transactions represent strong differences in end-user rights and platform goals:

from the unique features of decentralized surveillance to compatibility when making online payments, the two are more polarized than might be expected.

What makes a digital currency "digital"?

In short: a digitized medium does not mean a decentralized currency platform. Fiat currencies, transferred in cash or online, are still bound by traditional regulatory oversight and restrictions placed on any national currency: interest rates can be tampered with and the interests of financial institutions do not always have the best interests of their users in mind.

Ultimately, even though the digital media of payment gateways and contactless terminals can be improved upon by these trade-offs for fiat currencies, the regulatory framework that dictates modern and traditional fiat operations is exactly the same.

Cryptocurrencies: a fundamental difference in goals.

Founded in 2009 in the aftermath of the financial crisis, the arrival of Bitcoin brought to light these restrictions of a government-regulated centralized currency: Bitcoin has now provided a decentralized alternative that did not have these same restrictions.

From the adoption of the cryptocurrency seen in Greece to avoid the fluctuations of their standard fiat to the blockchain enthusiast looking to ride the tide of a growing cryptographic value; cryptocurrencies have a completely different goal.

In the short term, the rapid, albeit volatile, growth of cryptocurrencies means a convenient currency plan b for online purchases. In the long run, however, cryptocurrencies can represent a currency immune to the bureaucracy of centralized financial bodies; almost a "way out" from the corruption and centralized manipulation that led to the financial crash of 2008.

By trading the combination of manual and digital monitoring of checks and balances used by traditional banks, the consensus algorithms used by cryptocurrencies automate this verification process using a 'chain' of blocks that make any single point of failure nearly impossible; and without the need for any organization to supervise it.

Crypto funds: the difference is not in digital.

If we consider the fundraising scenario: the web and the payment technology presented to contributors and token buyers could be considered the same. Platforms mature, business models advance; but this does not change the fundamental differences in the regulatory structure for fiat and cryptographic-based transactions.

On the one hand, just as regular consumers can be drawn to cryptocurrency for the removal of third-party centralization, this goes further to incentivize entrepreneurs looking to set up a fund to raise capital, but without the traditional hoops and bureaucracy of traditional hedges. fund and IPO.

Welcome to the ICO, or "Initial Coin Offering": Unlike an IPO, in which entrepreneurs can raise fiat currency capital for their tech startup following a series of checks and regulations, the cryptocurrency behind ICOs is at the outside this regulatory perimeter. In theory, this would appear to be the perfect platform for entrepreneurs to ride the unprecedented rise in the value of the currency without the bureaucracy of fiat funds.

However, this is not without its challenges: just as many investors may rejoice over the lack of checks and approvals needed to get started with an investment portfolio, this same enthusiasm may lessen when it comes to the legal basis of what defines investment. , to begin with: the legal right to the underlying equity in the firm. This is due to the fact that an unregulated currency cannot distinguish between simple 'utility tokens' and equity shares.

In theory, this could allow an ICO to fool users who are investors when in reality they are mere token buyers.

Ultimately, this would mean that - for the benefits of decentralization in cryptocurrencies to truly outweigh the short-term hurdles for the consumer - they may need to update current algorithms and automated measures to replicate this same legal guarantee.  

Conclusion: One remaining dilemma for the investment scenario

Overall, when it comes to the differences between fiat currencies enhanced with a digital interface and cryptocurrencies completely divorced from regulators through a decentralized blockchain ledger: although transparency and central manipulation risk may define their unique goals, these same results have not yet been guaranteed when it comes to theoretical investment scenarios.

Ultimately, for the short-term ICO token buyer, this means weighing the benefit of a high-growth currency against the lack of legal control to grant ownership over your growing equity stake.