Recently, we hear lots of terms such as: cryptocurrency trading, investing in cryptocurrencies or names like the digital currency Bitcoin… So what’s all that? What are digital currencies? Do you think Bitcoin is the only currency in the world? We’ll answer of these questions in today’s article, so keep reading to the end!
Digital currencies do not have physical attributes and are available only in digital form. Transactions involving digital currencies are made using computers or electronic wallets connected to the internet or designated networks.
In contrast, physical currencies, such as banknotes and minted coins, are tangible, meaning they have definite physical attributes and characteristics. Transactions involving such currencies are made possible only when their holders have physical possession of these currencies.
Digital currencies have utility similar to that of physical currencies. They can be used to purchase goods and pay for services. They can also find restricted use among certain online communities, such as gaming sites, gambling portals, or social networks.
Digital currencies also enable instant transactions that can be seamlessly executed across borders. For instance, it is possible for a person located in the United States to make payments in digital currency to a counterparty residing in Singapore, provided they are both connected to the same network.
What are Digital Currencies?
Cryptocurrency could be a cryptocurrency that permits you to buy goods and services online. It uses a digital online ledger with strong encryption to confirm and protect online financial transactions.
The growing interest in these virtual currencies comes as a results of what’s referred to as “cryptocurrency trading”, during which these currencies are bought and sold to attain real financial profits from them.
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.
- Digital currencies can transfer value. Use of 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. This is not a purchase or sale transaction but, instead, represents a transfer of value.
What is The Difference between Cryptocurrency and Blockchain?
Once we hear the word “cryptocurrency” we may immediately think about the word “Blockchain”, as many folks think that both terms mean the identical thing, but this is often not true.
As we’ve already explained above, digital currencies are cryptocurrencies that are wont to purchase goods and services, while Blockchain is that the technology or technology behind it.
it’s a decentralized technology that includes encrypted records spread across many high-speed and capable computers, which manage all transactions made between clients within this network.
Thus, the foremost important difference between digital currency and blockchain technology is that digital currencies are a component or branch of blockchain technology.
Types of Digital Currencies and Their Prices
Some believe that there’s just one variety of digital currency, which is Bitcoin. However, that’s not true. In keeping with CoinMarketCap.com, there are over 6,700 digital currencies that are publicly traded and addressed, and also the cryptocurrency market remains witnessing an increasing growth daily.
At a time when Bitcoin is that the most well liked and most respected digital currency, there are many companies that have started issuing their own digital currency, which you’ll use to buy services and products from this particular company.
It’s like those points that you just earn once you buy merchandise from a particular site, which you’ll later exchange for real money that you simply use to shop for products from the identical site (and not the other site). Digital Currency
Here may be a list of the foremost famous kinds of digital currencies and their prices, where the bitcoin is topping the list and its price or value is approximately $ 969 billion.
- Bitcoin: The capitalisation is $969.9 billion.
- Ethereum: With a market capitalisation of $222.3 billion.
- Tether: $33.1 billion.
- Binance Coin: $30.5 billion.
- Cardano: $28.3 billion.
- Polkadot: $28.1 billion.
- XRP: $24.4 billion.
- Litecoin: $15 billion.
- Chainlink: it’s a worth of $13.3 billion.
- Bitcoin Cash: $13.1 billion.
The Importance and advantages of Digital Currencies
Digital currencies have gained the eye and support of the many people round the world for several reasons, including the following:
1. A Possible Future Currency
Many supporters of digital currencies believe that the latter, especially Bitcoin, will become the official currency within the future, which is why they’re rushing to shop for it now before it increases in value and price.
2. The advantage of Decentralization
The digital currency isn’t linked to any authority or central authority, like banks, and so digital financial transactions during this case don’t need an intermediary so as to hold out them, which eliminates transaction fees, which are some things that a lot of supporters of encrypted digital currencies like.
3. Safety and Therefore the Difficulty of Counterfeiting and Counterfeiting
As we’ve already explained above, digital currencies rely upon blockchain technology in their work, as this decentralized technology in recording and transferring financial transactions is one amongst the foremost secure methods of payment and transfer of funds, because the blockchain network cannot be easily hacked and it’s impossible to forge it. This makes cryptocurrency a preferred option for several.
Investing in Digital Currencies
Perhaps you’re now wondering about the subject of cryptocurrency trading, and maybe you’re thinking to yourself: Is investing in cryptocurrencies a wise choice? of course, although the value of digital currencies may rise within the future, these investors see that this can be nothing quite just assumptions.
Why? this is often because digital currencies are like real currencies, they are doing not create any cash, and so as to form a take advantage of it, you need to find someone who is willing to pay an amount over what you paid to shop for this digital currency.
Therefore, investing in digital currencies is different from investing in a very real, studied project whose value increases over time and with the rise within the value of money flow and also the profits that it achieves. Not only that, many experts believe that investing in digital currencies like Bitcoin isn’t completely safe, but some prominent voices within the investment community have advised potential investors to remain far away from it.
For example, legendary investor Warren Buffett has compared Bitcoin to paper checks: “It’s a awfully effective thanks to transfer money and you’ll be able to make love anonymously so on. Check could be a thanks to transfer money too. But are checks really worth it? All that money for her simply because she will transfer money?”
Some may ask again here: But isn’t Bitcoin a future currency?! it’s true that this possibility exists, but it’s worth noting that so as for a currency to be adopted because the currency of the long run, it must be stable. And stability is much from being the case with Bitcoin and other digital currencies. for instance, the worth of Bitcoin (trading price) was about $20,000 at the top of December 2017, but its value collapsed to about $3,200 after only 1 year, then it rose again to unprecedented levels in 2022.