Brandi Reynolds, CAMS-Audit
I am from the south, South Carolina to be exact. To me, that sweet carbonated beverage is a “Coke” even if the label clearly says “Pepsi”! It seems like many people have that same type of mental branding with cryptocurrency, I mean “Bitcoin”! I often hear people refer to “cryptocurrency” as just “Bitcoin”. But is that a good thing or a bad thing? I guess it is good for Bitcoin. Did you know there are over 5000 “altcoins” and the number continues to increase? Now, you may be asking, what is an altcoin?!
Any cryptocurrency that is alternative to Bitcoin is considered an “altcoin”. With the success of Bitcoin as the initial peer-to-peer digital currency, it has encouraged others to create many altcoins to target the possible limitations of Bitcoin.
Many of the altcoins are created on the basic outline provided by Bitcoin. Hence, most altcoins are also peer-to-peer. However, altcoins seem to offer more effective and reasonable ways to perform transactions on the Internet.
Now, here is a question for you. Are all cryptocurrencies virtual currency? Are all virtual currencies cryptocurrency?
Virtual currency is defined as a type of unregulated digital currency which is available only in electronic form. This currency is created, stored and executed only through selected software, mobile, or computer applications. Virtual currency can be transacted through dedicated digital wallets.
A cryptocurrency is a digital or virtual currency that is built with strong cryptography. Cryptography is meant to guarantee the security of the transactions and the participants. Bitcoin is a cryptocurrency but it is also a type of virtual currency. To make matters more confusing, both virtual currencies and cryptocurrencies are considered forms of digital currencies. Digital currency is the overall superset that includes virtual currency, which in turn includes cryptocurrencies. Compared to virtual currency, a digital currency covers a larger group that represents monetary assets in digital form.
Now let’s summarize:
- Virtual currencies are not always cryptocurrencies;
- Cryptocurrency is a form of virtual currency;
- Bitcoin can be classified as both a virtual and cryptocurrency; and
- They are all digital currencies!
If this is confusing, you have been paying attention and you are not alone. However, with these currencies becoming more mainstream, everyone in financial services should learn more about them. Feel free to ask one of our consultants for more information, including training offered by CorCom, LLC.