Digital Currency: The Future Of Your Money
What Is Digital Currency?
Digital currency is any currency that’s available exclusively in electronic form. Electronic versions of currency already dominate most countries’ financial systems. What differentiates digital currency from the electronic currency that’s already in Americans’ bank accounts is that digital currency never takes physical form.
How do digital currencies work?
Using digital currencies requires a mental shift in the existing framework for currencies, where they are associated with sale and purchase transactions for goods and services. Digital currencies, however, extend the concept. For example, a gaming network token can extend the life of a player or provide them with extra superpowers
Characteristics of Digital Currencies
As mentioned earlier, digital currencies only exist in digital form. They do not have a physical equivalent. Digital currencies can be centralized or decentralized. Fiat currency, which exists in physical form, is a centralized system of production and distribution by a central bank and government agencies. Prominent cryptocurrencies, such as Bitcoin and Ethereum, are examples of decentralized digital currency systems.
KEY TAKEAWAYS
Digital currencies are currencies that are only accessible with computers or mobile phones because they only exist in electronic form.
Typical digital currencies do not require intermediaries and are often the cheapest method for trading currencies.
All cryptocurrencies are digital currencies, but not all digital currencies are cryptocurrencies.
Some of the advantages of digital currencies are that they enable seamless transfer of value and can make transaction costs cheaper.
Some of the disadvantages of digital currencies are that they can volatile to trade and are susceptible to hacks