These days, there seems to be a lot of talk about whether or not something is a security or not.

But what does that mean? What makes something a cryptocurrency? And how does it differ from digital securities?

Cryptocurrency is a digital or virtual asset that uses cryptography to secure its transactions and to control the creation of new units. Cryptocurrency is decentralized, meaning it is not subject to government or financial institution control.

Digital securities, on the other hand, are digital assets that are backed by real-world assets and are subject to government regulation. Think of it as an asset in a digital wrapper. They are often traded on exchanges and can be used to raise capital & much more.

Cryptocurrencies are a type of digital asset, and securities refer to financial instruments. True cryptocurrencies, those that act as replacements for traditional fiat currency, are commodities rather than securities

Blockchains are the technology solutions that enable digital assets. A blockchain is a method of securely recording information on a peer-to-peer network. Simply put, the blockchain is a shared database or ledger. Pieces of data are stored in data structures known as blocks, and each node of the network has an exact replica of the entire database.

Blockchain ledgers, referred to as blocks, are generated via specific protocols that are different for each blockchain. Each block contains encoded information about the previous block, reinforcing the order and structure of the blockchain as it grows.

A digital asset is created, or minted, when new information is added to a particular blockchain. Through blockchain entries, users can exchange existing digital assets and/or create new (mint) ones, add licensing and more.

So what are the key differences between cryptocurrency and digital securities?

• Cryptocurrency is decentralized while digital securities are subject to SEC regulation
• Cryptocurrency is usually used as a means of payment while digital securities is more of an asset and would be considered an “investment contract,”
• Cryptocurrency is not backed by real-world assets while digital securities are often backed by real-world assets.
• Cryptocurrency is often volatile & changes second to second
• Cryptocurrency is not widely accepted as a form of payment while digital securities are used and accepted worldwide
• Cryptocurrency is still in its early stages of development while digital securities are well-established and government regulated