What is The difference between a virtual currency and Cryptocurrency?
A cryptocurrency is a particular type of digital currency. Both are virtual currencies but every virtual currency is not cryptocurrency. According to the European Central Bank definition virtual currencies are generally digital, although its precursor, the coupon, is physical. In the present day usage of the term virtual currency, in environments with digital communication and with disappearing importance of physical coupons, digital currency equals virtual currency, as defined by ECB and the Treasury.
There are many fundamental differences between a virtual (in general) currency and a cryptocurrency. Please read below some fundamental differences:
1: Environment:
Virtual currency (in general): Virtual currency can be anything from coupons to tokens. Virtual currency can appear in video games (like World of Warcraft) and it normally has no value outside of the environment where it was created.
Cryptocurrency: Cryptocurrency is a special kind of virtual currency. It has very specific rules and is fixing all of the Virtual currencies’ flaws.
2: Control
Virtual currency (in general): It is centralized and is governed by its creator.
Cryptocurrency: Decentralized and not owned by a single authority, instead it is owned by everyone who owns the cryptocurrency coins.
3: Value
Virtual currency (in general): Value can and will be manipulated
Cryptocurrency: Value is determined by supply and demand
4: Use
Virtual currency (in general): Normally used for a very limited range of products or services that are in domain of the developer.
Cryptocurrency: Can be used and exchanged for anything completely unrelated to the developer.
5: Exchange
Virtual currency (in general): In most cases transactions only go one way. You can trade fiat currency for virtual but not the other way around.
Cryptocurrency: Can be exchanged freely to fiat currency and back
6: Security
Virtual currency (in general): Has very low protection and can easily be hacked.
Cryptocurrency: Is designed to be extremely protected and non-hackable.
7: Trade
Virtual currency (in general): Can sometimes be traded between people in the same company or group.
Cryptocurrency: Can be traded by anyone, anywhere and at any time.
8: Age
Virtual currency (in general): Has very limited use and an expiry date
Cryptocurrency: When accepted it has potential to last forever.
9: Fiat currency flaw
Virtual currency (in general): Has almost every single flaw that fiat currencies have. It can be corrupted, manipulated, used to only serve a few people. It has an infinite amount, companies can always issue as much of it as they want.
Cryptocurrency: Is solving most of the problems fiat currencies have. It cannot be controlled, there is a finite amount and nobody can issue more.
10: Benefit
Virtual currency (in general): Can only be given to those who paid for it. The money it makes goes to the developer.
Cryptocurrency: Has the most fair distribution system possible. It is given as a reward to those who help secure the network by a completely transparent process called mining. It is a completely automated process, which no one can interfere with.
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