Digital currencies have been growing in popularity among big tech companies for some time now. Microsoft, Nintendo, and recently Amazon have all attempted to adopt some form of digital payment method. This typically involves some form of money equivalent online that you can use to make in-app purchases. But aren’t digital currencies the same as cryptocurrencies? Not quite.
With all the hype around cryptocurrencies, a lot of technical jargon is being thrown around among the masses. This often blurs the fine lines between certain concepts so let’s enlighten ourselves. The easiest way to understand digital currencies is to consider an example. Gamers will have no problem identifying with digital currencies like Simoleons (if you have ever played Sims) or Mario coins. Simply put, digital currencies are anything that you can use to make in-app purchases on a digital platform like a game or app. These currencies can often be bought for cash like in the popular gaming series “the Clash of Clans” or acquired through other in-game activities.
So how are they different from cryptocurrencies? You can think of cryptocurrencies as a special form of digital currency. That is right, crypto-currencies are also digital by definition, but they stand out in how the data on the exchange and store of value is recorded. Cryptocurrencies employ special methods like blockchain technology and some form of cryptography (proof of stake or otherwise) to record the transactions that take place with that currency worldwide. So the main difference lies in how the ledger is recorded and safeguarded.
What are the major implications of this difference? Well, it is more likely that digital currencies are more prone to be adopted for in-app purchases rather than cryptocurrencies. The reasoning is actually quite simple if you understand the main motive of any big tech company: Profits. Having your own digital currency ensures customer loyalty. It makes it easier for the users of the platform to make purchases within the platform (often a metaverse). Amazon coins for instance are intended to allow developers more flexibility in how they can price the products. Plus, users can be incentivized to stay on the platform for more digital coins. Finally, digital currencies are not nearly as volatile as cryptocurrencies are. They are not traded as assets in the real world and their dollar exchange values are usually fixed. For instance, 80 green gems in the world of Clash of Clans are barely worth 1 dollar. Digital currencies are most likely here to stay. It will not be surprising to see each major tech giant try to have its own say in this space.