In earlier days, the concept of money used to be a physical substance, such as gold and silver. Some ancient cultures used living things as a form of money – cattle were one of the oldest forms of money.
However, the modern world is becoming more technology centered. Ever since the introduction of the internet, everything, from space to schools and shopping centers is dependent on the internet, and even online transactions have suddenly become a THING! More and more people are starting to make online trades, as it gives them the ease to purchase any desired item without having to leave the comfort of their bedroom.
Many of these purchases are often made with e-money or Bitcoin – the most widely used form of digital currency.
The currency first came into circulation in 2009. During that short time span, Bitcoin was able to spark a lot of attention and worldwide interest. As a result, many merchants are now starting to accept Bitcoin payments for their services.
However, despite all the talk about how people nowadays keep themselves updated with the latest technological innovations, many still seem to struggle when it comes to differentiating between Bitcoin and e-money.
In this article, we’ve outlined how E-money and Bitcoin are different from each other. Let us begin.
How are they different?
Electronic Money aka e-money and Bitcoin are two systems for making payments that are digital in nature. Besides that, nothing is common between the two.
Electronic money is a mechanism designed to interact with traditional currency such as Euros and Dollars. Whereas, Bitcoin is an independent cryptocurrency with its developers and users having complete control over it.
Some anonymous programmers using the pseudonym, Satoshi Nakamoto, launched Bitcoin in 2009. It’s a digital file that consists every transaction that has ever happened in the network in its ledger, aka, block chain.
Bitcoins are not like fiat money, they are mined using computer power of high-tech computers in a distributed global network of volunteer “miners”.
The money balance recorded electronically on a stored-value card is electronic money. Unlike Bitcoin, e-money is under the regulations and controlling of the Government central banking system. Banks and customers would have public-key encryption keys. Public-key encryption keys come in pairs. Only the owner knows the private key whereas the public key is available to everyone.
In comparison, Bitcoin is strictly limited to Internet connection but E-money just requires access to electronic devices like mobile phones and an agent network. Also, e-money is equal to the amount of fiat money in exchange for electronic form whereas, Bitcoin has no possibility of reaching the real world in the form of a bill.
Example of a system supporting E-money
M-PESA is a mobile phone money transfer system that had launched in Kenya in 2007. It starts with converting fiat money into an equal e-balance, by only entering the recipient’s mobile number and the transferred amount. The issuer confirms the transaction by sending an SMS to the recipient. The benefit of this method is to eliminate the interference of banks which makes it so popular and successful in Kenya.
E-money and Bitcoin have their pros and cons but it is solely the responsibility of the user on how they handle their earnings. If more and more people shift from paper money to virtual currencies, this could irreversibly change our lives and social interactions.