The Choice Between Centralized and Decentralized Digital Currency

Yesterday, there was a rumor that Telegram will launch an ICO to fund their version of a cryptocurrency to be used inside the app and will launch the service in 2019. It is an attempt by Telegram of course to finally monetize their services and users, considering that Telegram today have no monetization possibilities.

It won’t be the first messaging app with its own digital currency, PeN for example already uses its own digital currency, PeNNeY, where users can transact and transfer PeNNeY to one another or use it for services that cost money and to shop. T
The rumor is to create a next-generation cryptocurrency that performs better than existing blockchain technology. With various implementation of digital currencies, the question is which is the right way?
Is it for centralized digital currency or decentralized cryptocurrency or a combination of both?

The main differences are as follows

1. Structure: In a centralized digital currency, there is an authority that regulates transaction, following set rules and parameters. In a decentralized cryptocurrency, there is no authority and no regulations, transactions are primarily between users without regulations or rules. An example of regulations for centralized digital currency is EU directive 2009/100 
2. Anonymity. In centralized digital currencies, all users are registered in the system or at least known depending on the system requirements. In a decentralized cryptocurrency, there is no need to identify the user.  However, all information about the transactions are logged into the chain of transactions
3. Transparency. In a centralised system, the users see his own transactions. In a decentralized blockchain type of technology, the user sees all transaction relating to that chain and of that user.
4. Control and manipulation. In a centralized system, there are sets of rules and regulations to be followed and a regulator that oversees those rules and regulation. In a decentralized system, there are no rules, no regulations other than what is set by the community pursuing the decentralized cryptocurrency.
5. Legal protection. Centralized digital currencies are governed legally by a known set of rules and regulations while decentralized cryptocurrencies have no such framework. An example of legal framework for centralized digital currency is EU directive 2009/100
6. Responsibility. In a centralized system, there are administrators responsible to ensure correctness of each transaction. While on a decentralized cryptocurrency, there is no one responsible for the transactions other than the users who have executed such transactions.
7. Confidentiality. In a centralized digital currency, the transactions are regulated.  Hence information about such transactions becomes available to regulators including information of the user who executed such transactions. In a decentralized cryptocurrency, the transaction is available in the chain of information but there is no information about the user.
The choice whether to use a centralized digital currency or a decentralized cryptocurrency is then down to the purpose and for some based on principle (the absence of a governing body). Is it possible to benefit from a combination of both? Yes, it is, one good example is PeNNeY where user information is limited to what the user has provided upon registration while all the transaction information is included in the transaction chain. Furthermore, PeNNeY functions as a utility like a normal currency which can be used to purchase services and products and exchange with other users.

Posted by Ian Vernon

Ian Vernon is the CEO of Dark Matter AB that operates PeN. He consider himself as a student of life with passion for innovation and would like to make the world a better place even in.

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