Digital currency is a form of currency that is only available in electronic systems. It is the opposite of hard cash that people can store in the house or wallets. Most experts call it cyber cash or electronic money because it exists in the internet. A digital cash doesn’t have the physical attributes or characteristics. The transactions of this currency occurs in the internet via special designed networks or digital wallets that people have to login and make transactions. Although they don’t have physical traits, digital currency has value and utility and they can be used to buy goods and services from vendors and sellers.
Some platforms may prohibit the use of digital currency and examples of such companies include the gambling platforms, social networks and online communities among many more others. The joy of digital currency is that people can instantly make transactions across the globe. For example, a person in the USA can send money to India within seconds. This is not the case when it comes to bank money because it has to take like several days to reflect in the recipient’s accounts. Such convenience and reliability of digital currency is what has made it to become common business it enables business to have a global operation.
Properties of the Digital Currency
- Digital currency only exists in electronic forms, they are not available in any other form
- Digital currency can either centralized or decentralized. Example of centralized currency include the Fiat currency which happens to also exist in physical form. Cryptocurrencies are decentralized.
- Digital currency can enhance value and also be used to purchase goods and services. An example is, if someone uses digital currency to upgrade from one gaming subscription to another, that person has added value and when someone uses digital currency to buy goods from an e-commerce platform, that person has bought goods and services.
Where or what to use your digital currency on depends on the rules of the platform you are in. some platforms allow you to make purchases while others just allow you to exchange your digital currency with value. While some of the digital currency can be converted into cash, most of them cannot be converted to cash so they can only be used electronically.
Types of Digital Currency
Digital currency is a broad term that entails a lot of parameters in it. If you say digital currency, no one would understand what exactly you mean unless you be specific on the kind of currency you are talking about.
This is a form of digital currency that uses cryptography to protect and authorize transactions among its members. Cryptography is also used to make sure currencies are created in a moderate way to prevent uncontrolled creation of the currency. Examples of the currencies in this niche include Bitcoin, Ethereum, Tether, Binance coin and the USD coin. These currencies have different values so for those who are interested, it is worth researching on what coin has the best value before settling for one.
This is a form of digital currency that is created by developers and it is not regulated by any authority. The organization or developer that makes it has the full autonomy to use it in whichever way they see fit. A good example is the gaming network which create coins to enable its members purchase superpowers or advanced weaponry to continue playing the game. That form of currency cannot be used to purchase materials or services from other company and it can only be used on one single platform. In most cases, exemplary performance is what makes people to earn virtual currency in the platform they are using.
Central Bank Digital Currency
This is a form of digital currency that is created, regulated and released by a central bank of a country. Mostly, central banks offer digital currencies as a substitute of hard cash to its customers who want to have digital currency instead of hard cash. Once the amount you have is converted into digital form, it cannot be reversed back to hard cash so it would be used only in digital form. Fiat currency is the only form of digital currency that can be converted from digital to hard cash and vice versa.
Advantages of Digital Currencies
Digital currencies are becoming extremely popular and in fact some countries such as England, Sweden, and Uruguay are all having plans to make sure they turn their currency into both digital and hard currency. This means that people will have the ability to choose whether they want digital money or hard cash. Here are some of the advantages that comes along with digital currency.
You Can Transfer Them at a Very Faster Rate
When it comes to making transfer of money, it is easier to make transactions because it just requires the click of a button. Furthermore, this transaction is always instant across the globe and it requires very little to no regulatory justifications which means people access their money easily. Transaction costs are also considerable low given the fact that there are no intermediaries involved and you can always enjoy excellent experience doing the transactions at all times. There are verifiable records for every transaction you make which means you cannot miss or make mistakes and fail to track it. Most digital currencies are all managed by administrators of the site or network you are transacting on and they can look into any complain you have and make the necessary corrections.
They Cannot Be Soiled or Get Lost
Digital currency is protected by passwords and other online security features. For someone to steal from you, they need to have your login details and once you get back your account, you would be in a position to notice where your money was transferred and you can recover it. Since it is not hard cash, it cannot be spoilt so your money is always safe and you can be sure that no one will tamper with it as long as you don’t share your security details.
Transaction Costs Are Very Low
When it comes to transaction costs, you don’t pay a lot because it is direct from the sender to the recipient. This means you cannot lose a lot of money as transaction fees and this is an advantage to people who transact in bulk. Intermediaries and middle men are very few to none so you can always enjoy excellent outcomes at all times.
In a summary, digital is one of the best currencies that is taking over of now due to its convenience, reliability and safety of money. Not all companies accept the currency but majority have started considering it including even the banks.