Hi there,
The primary difference between cryptocurrencies like bitcoin and digital tokens like airline miles, rewards points and similar digital value place holders lies in the way in which they are created and transacted.
Cryptocurrencies are made up of encypted code which is simultaneously stored on multiple computers - thousands of computers worldwide in the case of major cryptocurrencies. A record of every change to the code is maintained on each computer in the network. When the code is updated on one computer, the changes are checked against the code on all other computers in the network. A change to code is only approved if the change has been recorded by all computers on the network (which requires a complex decryption key). If the change is approved, the code is simultaneously updated on all other computers. This prevents code from being copied or changed without the "approval" of the entire network. For this reason, no trusted service provider is required to manage and secure these tokens.
On the other hand, digital values like digitally stored airline miles, rewards points, mobile phone credit, and even the digital "money" which appears in your bank account are entered into a single computer system by a trusted party (an airline, retailer or bank, for example). If a third party gained access to that computer, they could quite easily alter or replicate the code. For this reason, computer systems which manage these tokens must be secured and managed by a trusted third party.
Best regards from Moneyguru
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