As a freelancer in Nigeria, “digital currency” and “cryptocurrency” are terms you’ll encounter if you’re interested in using blockchain-powered platforms like Crane to receive payments. This piece explains everything you need to know about the terminologies. As a side dish, you’ll learn about the best digital currency (or cryptocurrency) for receiving payments in Nigeria.
Digital currency vs cryptocurrency: A summary table
Features | Cryptocurrency | Digital currency |
Architecture | It’s built on the blockchain. | It operates on distributed ledger technology. But some digital assets, like the central bank digital currencies, work on private networks. |
Security | Generally uses cryptography (an advanced data security technique) to protect transactions. | It may or may not use cryptography. |
Use case | Can be used for payments, investment, access to services, and payments. | Can be used for legal tender and investment purposes. |
Examples | Private tokens (e.g., Crane Coins and Finance Coin) and central bank digital currencies (e.g., eNaira). | USDT, USDC, eUSD, Bitcoin, Ethereum. |
What is digital currency?
Digital currency is an umbrella term for valuable assets available in electronic form. They’re available on computer networks, meaning you can’t physically hold digital currencies, although you can spend and transfer them electronically.
Architecture-wise, digital currencies are typically built on blockchain technology. But that’s not always the case. Some digital currency classes like tokenised assets (e.g., Crane Coins) operate on private networks. Similarly, selected central bank digital currencies (CBDCs), such as the digital Yuan (e-CNY), are built on centralised platforms, not the blockchain.
Types of digital currency
1. Central Bank Digital Currencies (CBDCs)
CBDCs are government-issued digital currencies. The central bank owns and controls CBDCs, making their market value less vulnerable to typical cryptocurrency fluctuations. Examples include the eNaira, owned by the Central Bank of Nigeria (CBN), India’s e-rupee, and the Bahamas’ Sand Dollar.
Governments use CBDCs to improve financial inclusion and payment efficiency, reduce reliance on physical cash and traditional banking institutions, and boost economic growth.
Some CBDCs (e.g., eNaira) are built on the blockchain or distributed ledger technology (DLT). Other CBDCs like the Digital Yuan (or e-CNY) are built on a central bank database to enforce “controllable anonymity.”
2. Cryptocurrency
They’re built on blockchain technology, a transparent and decentralised system that records transactions in blocks. No single entity controls the blockchain and, by extension, cryptocurrency transactions.
Different networks power cryptocurrencies. For instance, Bitcoin—the first crypto—operates on its blockchain for transaction validation. Similarly, Ethereum has a unique network system for completing transactions. Examples of cryptocurrencies include Solana, Cardano, Polkadot, Avalanche, etc.
Like digital currencies, cryptocurrencies are built for cross-border payments and savings investments, especially in Nigeria, where over 6 in 10 people invest in cryptocurrency to hedge against hyperinflation and monetary devaluation.
What about stablecoins like eUSD, USDT, and USDC?
Generally, Bitcoin’s price affects the value of other crypto assets. If the value increases, other cryptocurrencies will experience a price surge. The same applies if the Bitcoin value plummets.
But there’s a problem: Bitcoin is a deflationary asset with limited supply. The supply limit makes Bitcoin and, by extension, other cryptocurrencies vulnerable to price surges. The fluctuating market value of crypto assets makes freelancers and investors alike wary of using them as a store for borderless payments or a store of value.
In contrast, stablecoins don’t have supply constraints. Instead, they’re tied to a stable asset class (e.g., physical money or gold) that makes their value stable compared with cryptocurrencies like Bitcoin. As a result, stablecoins are ideal for payment remittance and savings.
Examples of stablecoins are listed below:
1. Electronic Dollar (eUSD)
It’s an asset-backed stablecoin. It’s pegged directly to the US dollar, i.e., 1 eUSD = $1. It operates on the Reserve Protocol, which community members on Ethereum own and control.
Besides Ethereum, eUSD operates on MobileCoin, a privacy-focused blockchain for peer-to-peer borderless payments. eUSD has the following benefits:
- Optimal security with end-to-end zero-knowledge encryption.
- Low processing fees. It costs $0.0025 per transaction, irrespective of the volume.
- Supports Know Your Customer (KYC) and Anti-Money Laundering (AML) principles for regulatory compliance.
- Swift transaction completion, especially on mobile devices. eUSD finishes transactions in less than five seconds.
2. Tether (USDT)
Tether (or USDT) is an asset-backed stablecoin. It’s nailed at a 1:1 ratio to the US dollar. The private company Tether Limited owns and controls USDT reserves. USDT supports multiple network protocols, including Algorand, Celo, Cosmos, EOS, Liquid Network, Solana, Tezos, Tron, and Ton.
3. The USD Coin (USDC)
Like the USDT, the USDC is a fiat-backed stablecoin. Its value is equivalent to the US dollar. This means 1 USDC = 1$. Circle manages USDC finances with the Circle Reserve Fund (USDXX), a Security Exchange Commission (SEC) registered money market fund. Unlike USDT, financial institutions regulate USDC business, making USDC more stable and transparent for borderless payments.
USDC supports the underlisted 16 networks:
- Algorand
- Arbitrum
- Avalanche
- Base
- Celo
- Ethereum
- Flow
- Hedera
- NEAR
- Noble
- OP
- Magnet
- Polkadot
- Polygon
- PoS
- Solana
- Stellar
- zkSync
Is digital currency the same as virtual currency?
Virtual currency and digital currency can be used interchangeably. Both terms explain money you can spend on designated software or computer networks. Every virtual currency is a digital currency.
Like digital currencies, private entities or groups of developers may issue virtual currencies. A typical example is the Crane Coins (CNC), a utility token for buying airtime and data on Crane.
Digital currency vs cryptocurrency: which is better for receiving payments in Nigeria?
Digital currency is a generic term for non-physical currencies (fiats). It includes currencies that aren’t necessarily built on the principles of distributed ledger technology. Therefore, not every digital currency (e.g., private tokens) is designed for borderless payment.
CBDCs are used for payments, but a central entity typically manages them. As a result, CBDCs have a stable and transparent market value even though they don’t necessarily adhere to the unique decentralisation principles of blockchain technology.
In contrast, cryptocurrency (especially stablecoins like USDT, USDC, and eUSD) is built on the blockchain and enabled for international payments, savings, and investments.
Unlike CBDCs, cryptocurrencies like Bitcoin and Ethereum have a fluctuating market value. Stablecoins, however, are tied to a physical asset to stabilise its value. In this sense, they’re perfect for payments.
Summary of digital currency vs cryptocurrency vs stablecoins for payments
Features | Cryptocurrency | Digital currency | Stablecoins |
Issuing authority | Private organisations. | The central bank or authorised organisations. | Private entities and financial institutions. |
Market volatility | Highly volatile. | Moderately volatile depending on the issuing entity. | Fairly stable because it’s pegged to physical assets. |
Regulation | Limited regulation. However, crypto platforms are subject to KYC and AML laws. | Controlled by the central bank and other private entities. | It depends on the issuing entities and the country they operate. |
Use cases | Cross-border and local payments, decentralised finance (DeFi), and investment purposes. | Domestic payments and medium of exchange. | Domestic and borderless payments and hedge against inflation. |
Examples | Bitcoin and Ethereum. | e-CNY and eNaira. | Tether (USDT), USD Coin (USDC), eUSD, and PayPal USD (PYUSD). |
How can I withdraw digital currencies to my local bank account in Nigeria?
Digital currencies have few merits compared to traditional banking institutions: they’re easy to acquire, transactions are swift, and the processing fees are largely affordable.
But there’s a constraint: figuring out how to transfer digital currencies to a local bank account in Nigeria.
Technically, you can’t send digital currencies to a local bank account in Nigeria. Well, not directly. The plausible action is to convert the digital currency to naira and subsequently withdraw the cash.
This is where Crane—a blockchain-powered financial service—comes in. We’re an off-ramp service for collecting payments in crypto and converting digital assets to naira.
We provide two options for receiving money in crypto from anyone.
1. Regular crypto deposit
It lets you collect crypto with your Crane digital wallet. It works like this: send wallet address to client > receive crypto/stablecoin > convert to naira > withdraw to a local bank account.
On Crane, we provide the auto-convert feature to reduce the impact of the volatile crypto market. Auto-convert lets you set the price conditions (above or below the current market rate) for converting crypto to naira. Your crypto will auto-convert to naira once the market rate matches the set conditions.
On Crane, receiving payment in crypto is free, while we charge 2% of the transaction volume for converting crypto to naira.
2. Bank Direct
It lets you receive the naira equivalent of crypto directly into your local bank account. This option is ideal for users who don’t fancy interacting with the crypto market.
The process works like this: send wallet address to client > receive the naira equivalent of the crypto in your designated bank account. It takes two minutes or less.