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We put together a primer on the differences between cryptocurrencies, digital, and virtual currencies, three terms that do not actually mean the same thing.
Defining digital currency
Digital currency is a general term used to describe all electronic money. This includes both virtual currency and cryptocurrency, which can be regulated or unregulated.
It is only available in digital or electronic form and dissimilar from cash, it is intangible. Digital currencies, which can only be used by electronic wallets, are also commonly called digital money.
What about virtual currency?
Virtual currencies are a type of digital currency, usually managed by its creators and used and accepted among the members of a specific virtual community.
However, all virtual currencies are digital which means they exist online only. But not all digital currencies are virtual because they exist outside a specific virtual environment.
We can say that virtual currency is a representation of monetary value issued, managed, and controlled by private issuers for the transaction of P2P payments. They are sometimes represented in terms of tokens. Moreover, they may be unregulated without a legal tender such as coins or banknotes, cryptocurrencies such as Bitcoin and Ethereum are virtual currencies.
What is a cryptocurrency?
The word “crypto” in “cryptocurrency” refers to the fact that many encryption algorithms and cryptographic techniques are used to ensure security across the network.
Many cryptocurrencies operate as decentralized systems without the need for a trusted third-party like central banks. In this instance, P2P transfers are the ease with the use of private and public keys.
Although Bitcoin is the most popular, it’s not the only cryptocurrency. There are many alternatives, or altcoins, such as Litecoin and Monero; and a lot of reliable platforms like Phemex at www.phemex.com for the exchange of derivatives.
Here are the key points: the digital currency is the basic term to refer to money that is available only in the digital space. Virtual currencies and cryptocurrencies are digital currencies because they are available online.
Virtual currencies are a structure of digital currency accessible in the virtual world.
Cryptocurrencies are digital currencies because they are present online, but they are also virtual currencies created with cryptographic algorithms.
It is fundamental to understand the differences between the three. Most of all, it is important to talk to a trustworthy source such as Phemex for trading platforms.