What is Virtual Currency, Types of virtual currency, blessing and downsides of Virtual currency
What's virtual currency?
Types of virtual currency?
Blessings and downsides of virtual currency?
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What's virtual currency?
Digital currency is a form of currency that is available exclusively in electric form.
Digital currency generally doesn't have a physical form, unlike currencies with printed banknotes or minted coins.
It is called digital Currency electronic money, electronic currency, or cyber-cash.
They are approachable with computers or cell phones.
Digital currencies don't require a go-between for a transaction.
All cryptocurrencies are digital currencies but not all digital currencies are crypto.
More details about digital or virtual currency.
Digital Currencies are intangible.
Transactions can be done only through computers, cell phones, or electronic wallets.
Like any other fiat currency, It can also be used to buy goods and pay for services.
They allow for instantaneous transactions that can be seamlessly executed for making payments across borders when connected to supported devices and networks.
As payments in digital currencies are made directly between the parties are usually instantaneous and low-cost.
Transactions involving brings in necessary record-keeping and transparency in dealings.
Types of Digital Currency.
1) Cryptocurrency
2) Virtual Currency
3) Central Bank Digital Currency
1) Cryptocurrency:-
when we buy or sell things the payment is usually processed by a bank or credit card company problem number one the companies often take a cut of the transaction - we have to trust these companies to protect their sensitive data from hackers three most international payments take a long time and are expensive to solve these problems we could use a special currency that is secure and based on the science of cryptography which is a way of protecting information using mathematics this special type of currency is called a cryptocurrency and only exists in computer networks when you send someone in this special currency the money goes directly to them removing the middleman and at the same time the transactions broadcast to the entire network and recorded in a permanent way which means it's almost impossible to fool the system costs of making payments are lower transactions are faster especially across countries and even those people around the globe who don't have a bank accounts can buy or sell goods and participate in the global economy however, there are some risks the transactions and most cryptocurrencies are anonymous some cryptocurrencies can even be untraceable this can make it easier for the bad guys to make payments without being noticed if you lose your password you could lose all your money at the moment cryptocurrencies are highly volatile they can't process large amounts of transactions quickly yet and they're not even widely accepted but if we can counter the risk then this new technology or some variation of it can completely change the way we sell buy save invest and pay our bills and who knows this could be the next step in the evolution of money.
2) Virtual Currency:-
Digital currency is a form of currency that is available exclusively in electric form.
Digital currency generally doesn't have a physical form, unlike currencies with printed banknotes or minted coins.
It is called digital Currency electronic money, electronic currency, or cyber-cash.
They are approachable with computers or cell phones.
They allow for instantaneous transactions that can be seamlessly executed for making payments across borders when connected to supported devices and networks.
As payments in digital currencies are made directly between the parties are usually instantaneous and low cost.
Transactions involving brings in necessary record-keeping and transparency in dealings.
3) Central Bank Digital Currency:-
we're talking about central bank digital currencies or CBDs and programmable money in the last type, we talked about the history of money and how money actually came into being and why there is a center why there is a central bank, and what it actually does we also talked a little bit about the decoupling of the money supply from gold which is used to be the case that money was pegged to gold specifically us dollar in the Bretton wood system where we called the gold standard which was abandoned in 1971. now that kind of led to the fact that money supply became decoupled from that gold and that's what we call fiat money fiat is Latin and actually means let there be so let there be money and it kind of refers to the fact that uh central banks can now essentially uh what's often called you know print money out of thin air or create money at the stroke of a keyboard um and that's what we call feared money as opposed to crypto money or uh crypto coins that are not believed to be fiat money or the money that was actually coupled to Bretton the gold standard uh before the Bretton woods agreements collapsed actually a digital currency doesn't even have to be a cryptocurrency while all cryptocurrencies are digital currencies it doesn't have to be necessarily the other way around so you actually may know digital currencies or from other contexts like for instance gaming in gaming universes you can have digital coins digital currencies and you can use them inside of the game to purchase things to uh like body armor perhaps or an upgrade so it's not a completely new concept at all so digital currencies are currencies that can transfer value digital now when we talk about central banks in this context we talk about central bank digital currencies and we ask ourselves well where do they come from and why are central banks all of a sudden interested in digital currencies or making their own digital currency you may ask yourself well there was a lot of pressure on central banks when the other digital currencies started to take off and by the other digital currencies I really mean bitcoin um when bitcoin became more and more prominent and other digital currencies cryptocurrencies started to emerge it became clear that they might be a viable alternative to fiat money and the central banks started to be worried to a certain extent that they might be disrupted almost in the sense that alternative money systems or systems of value transfer might be created that would perhaps call into question uh the supremacy perhaps or the control that a central bank could have over the economy long term now that's not the only reason there are other reasons of course there's an emerging token economy there's an emerging crypto economy and of course a the central bank also needs to be responding to those needs and needs to be able to have a monetary policy that's adapted to this so there are many good reasons to invest in research on central bank digital currencies and a lot of central banks did there's actually a really good map you can have a look at on the Atlantic council website which we'll show and this will actually give you an idea of where we are with digital currencies central bank digital currencies worldwide what is so special about the central bank digital currency and what are the options what are the perhaps drawbacks well one of the criticisms that many people have when they hear that central banks are issuing digital currencies are privacy concerns will the government be able to track every single transaction that everyone actually does or transacts how does that work with privacy concerns there are other ways of controlling this money for instance the concept of programmable money now if you think about the example of a stimulus check wouldn't a government be very interested in giving you a stimulus check that actually starts losing value over time why would they do that well if it's meant to be stimulus the money should be spent in the economy so if you can incentivize that by saying let's say a thousand dollars a thousand euros in October will be only 750 euros in November 500 in December would you have 'a very large incentive to spend that money immediately into the economy and this is what programmable money can do another example welfare checks for instance you could say well you can spend this money on certain issues on certain items not on others so there is a new way of directing money and monetary policy but also social policy and other policies through programmable money is this a good thing is it a bad thing that's really the question and many questions are unanswered at this point and we are in a stage where central banks are experimenting with this there are some examples where uh experiments are already quite far ahead so, in China, for example, there is a digital yuan that's actually being field-tested right now there were wallets given to people that actually contain digital e1 and they're being spent and data is collected and experiments are made so to speak we're thinking back to the last episode when we started talking about what are the characteristics of money in our first the episode we mentioned those characteristics and again I'm gonna have o read those durability portability divisibility uniformity limited supply and acceptability now you can see that with programmable money and central bank digital currencies these characteristics can be manipulated and they can be used in a certain way for instance the acceptability universal acceptability the uniformity and the limited supply can all be tweaked in order to achieve certainly policy goals and here obviously is where some people are really concerned they think that might be taking it too far on the other hand central bank digital currencies can provide the kind of trust and stability that in this context, only central banks can and that would be the argument that they would make so there really is no clear answer here but digital money isn't just used by central banks in fact many many projects on the blockchain use digital money or forms of digital money in fact most of the projects that are built on the blockchain use some kind of token the currency that's associated with the blockchain project a token by contrast we call a currency associated natively with a blockchain a coin for example, bitcoin is associated with the bitcoin blockchain, or ether is associated with the Ethereum blockchain so these rare coins and coins are what we're going to talk about in View advanced statistics on the blog you're reading Compare this blog to other
History
David Chaum introduced the idea of virtual cash through a research paper in 1983.
In 1989, he founded digital cash an electronic cash company to commercialize the idea in his research.
E-gold was introduced in 1996.
In 1998 PayPal was created into the picture.
In 2009, bitcoin was started which is a decentralized blockchain-based digital currency with no central server and no tangible assets held in reserve.
Pros of Virtual Currency:-
- Lover transaction costs and the ability to make payments at any time.
- Faster receipt of funds than through heritage financial institutions.
- It is easier and more serene for international customers to do business with you.
- Fraud sanctuary, for e.g. by trading with cryptocurrency, you won't be forced to reveal your personal information.
Cons of Virtual Currency:-
- For instance, criminals could use the digital cash system to launder money to different countries.
- The lack of traceability is a major problem for the government and legal authorities it doesn't have any significant impact on the user community.
- Irreversible payments:- There is no center point in payment processing so if you transfer someone by mistake and want to get a refund, you can only ask the person to refund payment, and if he refused then forget about it.
- At the end of the day, virtual currencies have the potential to change the world of business as we know it.
- while it is more than clear that virtual money offers numerous benefits that venture capital does not, some business owners are not comfortable with making this switch just yet.
- In other words, obstacles that virtual currencies must overcome to become mainstream are not just economic but mental as well.
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