Digital Currency vs. Cryptocurrency: The Pros and Cons


As technology evolves, society advances as well. Many of these developments are changing how humans go about their daily lives. Today, technologies like electric cars and smart assistants are becoming more common.

More on the finance side, using cryptocurrencies and digital currencies is one technological advancement that has made strides in the past few years. People used to always carry physical cash for transactions, with debit or credit cards as alternatives. Nowadays, you can transact without using either.

The rise of cryptocurrency and digital currency has drastically changed the way people conduct business. Soon, people may not need to bring as much physical cash or cards in their wallets.

As physical currency slowly phases out, you must understand the difference between digital currency and cryptocurrency to utilize both.

Digital currency is essentially e-cash or fiat money in digital form. It doesn’t need any special methods to encrypt them. On the other hand, cryptocurrency involves payments on a blockchain, a decentralized public ledger.

Understanding the pros and cons of digital currency and cryptocurrency will provide knowledge of how each process work and which is the better option for you to use. The following section delves into discussing these in-depth.

The Pros and Cons of Digital Currency

What are Digital Currencies and Are They The Future of Money (1)


1. High security against fraud

One of the best features of digital currency is its high security. You may hesitate to shop online as it requires you to input your personal information. Contrary to popular belief, digital currencies can offer anonymous direct transactions, leaving your personal data private.

eCash systems use a digital signature for encryption and a “blind” signature for authentication. They generate two kinds of keys: private and public. During the transaction, you keep the private key.

Meanwhile, public keys are sent to merchants, banks, and others to verify the transaction. These are necessary to protect banks, consumers, and merchants from illegal activity.

Online transactions may require you to enter a PIN before completing a purchase. It’s best not to share that PIN with anybody, as it poses an opportunity to leak data.

2. Cheaper transaction costs

Digital currencies have the luxury of completing transactions quickly, preventing leaks, hacks, or frauds. Thanks to the seamless process, most transactions have free direct transfers and no additional fees.

Numerous banks require a small fee per transaction, such as a transfer fee, ATM withdrawal fee, and closing fees. For business owners, digital currencies are a great option to keep your operating costs low.


1. Susceptible to hacking

Digital currency is susceptible to hacking because it’s stored in virtual space, and computers and other devices can access it. Hackers use various methods to break into these systems, including phishing emails designed to trick users into giving up their passwords or personal information.

In addition, there are many ways hackers can access a digital currency account without needing any information from the user.

Tactics such as creating scam e-wallet apps can target users, infecting their smartphones and leading to unauthorized digital payments. Other ways include malware that can immediately access the user’s phone, typically through a phishing link that the user may have clicked.

2. Not publicly transparent

Digital currencies aren’t publicly transparent. Only the banking authority, sender, and receiver can access transaction records. This may sound like a benefit, but for example, if there’s a conflict with an asset, you’d have to go through bureaucratic hurdles to resolve it, rather than just managing it yourself.

Since digital currencies are centralized, the whole network is dependent on a single point of failure. Numerous organizations are aware of this disadvantage which is why they deploy various measures to contain it.

Digital currency also doesn’t have full control over transactions and security issues. It relies on a third party to operate. Organizations can’t guarantee you’ll get your money back if someone steals your account credentials or hacks into your wallet.

Digital Currency vs. Cryptocurrency

The Pros and Cons of Cryptocurrency


1. A good hedge against inflation

Cryptocurrency is a good hedge against inflation because it’s not correlated with other assets. That means that if the price of your stocks and bonds is dropping, you won’t see a decrease in the value of your cryptocurrency investments. It’s also easier to access than other hedges as you can just buy it through an online exchange.

2. Easier transfer of funds

With cryptocurrency, you can easily transfer it to any person without approval. If the system is purely a peer-to-peer operation, both parties aren’t required to have permission from an external authority like a bank or credit card company.

You’ll need a crypto wallet and the receiver’s private key to transfer crypto. There are little to no fees in making this transaction. Cryptocurrency transactions are also secure because of their decentralization. No single person or organization controls them, so they can’t be easily hacked or tampered with.

3. Self-governed and managed

Cryptocurrency is governed by the code that runs it, which is publicly available on the internet. The governance of cryptocurrencies is done through consensus among users, miners (who verify transactions), and developers (who write code).

The benefit of this type of governance is that it provides transparency and accountability for all parties involved. You can quickly fix problems with a cryptocurrency’s governance structure or code because they’re accessible to people who want to get involved.


1. Attractive technology for cybercriminals

The unfortunate truth behind any technological advancements is that cybercriminals will always be able to adapt. Whether it’s an app, software, or security feature, these cyber attackers will eventually find loopholes in the system and hack your accounts, making personal information, money, and social media accounts vulnerable.

In most countries, illegal crypto activities aren’t banned because there’s no governing authority over the system. The only thing that officials can do is create restrictions, but that doesn’t stop criminals from doing malicious activities.

Additionally, cryptocurrency is attractive to criminals because of its anonymity and the fast transfers between two parties. It allows them to move money around the world quickly and easily without leaving any trace of their activity which can involve money laundering and other illegal activities.

2. Volatile cryptocurrency market

The cryptocurrency market is highly volatile because of many factors such as media hype, supply and demand, government regulations, and investor and user sentiments. These make estimations on value changes difficult.

Having a keen eye for analyzing and researching the market while reading news and trends about cryptocurrency can help predict prices.

You need to invest lots of time and money if you want to be prepared for any situation. Crypto’s unpredictability plays a big role in the market and can deter people from investing.

3. Lack of regulation

The finance industry is heavily regulated, leading to more stability and ensuring that no suspicious activities are being done. Digital currencies currently exist outside these regulations, providing users with more freedom, but it also means they are prone to malicious activities.

Several cybercriminals can sophisticatedly hack the system and exploit data for their personal needs. Authorities are most concerned about money laundering and trafficking of goods.

The Pros and Cons of Cryptocurrency

4. An Investment for the Future

Nobody can tell how transactions will turn out in the next few years. As fintech developers continue to innovate, digital currency and cryptocurrency can be mainstream payment methods that offer the best benefits.

Protect your investments by understanding proper regulations, bitcoin economics, and network security. The more you know the different angles of digital and cryptocurrency, the better you can create a safe financial environment.

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Author Bio:

Kimberly MacedaKimberly Maceda is a content writer for BSV Devcon. She has been writing insightful content for a wide range of niches and platforms. She believes there’s a fine line between right and wrong, with the Oxford comma comfortably lying in the middle.