Technology has dramatically altered the retail landscape. The way we shop, pay for things and transfer money is evolving at a rapid rate – with one of the most important being the rise of digital currency. Find out about the basics of digital dosh with this in-depth guide from payday loans direct lender Wizzcash.
What is digital currency?
Digital currency can be defined as a medium of monetary exchange that is electronically created, used and stored. Or, in easier language, currency that exists in digital form.
There are different types of digital currencies:
You may have heard of cryptocurrencies. These are best defined as a subset of digital currency that has an added layer of security. A defining feature of these is the fact they are not issued by any central authority.
There are also virtual currencies – defined as digital money used by members of a virtual community.
What differentiates digital currency from physical currency?
Aside from the obvious – digital currencies are electronic, you can’t hold them the way you hold coins and banknotes – the following are characteristics of digital currency:
Digital currencies are often referred to as being decentralised – this basically means no-one owns them. Pound sterling, for example, is ‘managed’ by the Bank of England. US dollars, the Federal Reserve. No single entity controls digital currencies.
- Digital currencies are flexible and near-instantaneous – meaning extremely fast transactions.
Digital currencies can be borderless and not defined to one geographical location.
Digital currencies are of course the same as physical currencies in that they are used to buy things.
What was the first digital currency?
Who uses digital currency? What can I buy with it?
All sorts of people. Digital currencies can be used by individuals like you and me. Many people use the digital currency Bitcoin, for example (which we’ll talk about next), to buy things on ecommerce sites. You can even pay for a pizza using digital currency if you want.
They are increasingly being used by businesses and organisations too. In Australia, for example, digital currencies are an “increasingly popular” option for firms, with many accepting them as payment and using them to pay employees. However, businesses aren’t required to accept digital currencies because, generally speaking, they’re not legal tender.
You’ve probably heard of Bitcoin. As the most well-known digital currency, it’s become the poster-currency for the movement. Thought to have been created by a collective of programmers operating under the pseudonym Satoshi Nakamoto, Bitcoin is created and held electronically.
How are Bitcoins stored?
They’re stored in a ‘digital wallet’ from which you can use them to buy and sell Bitcoins and pay for things.
How do I get Bitcoins?
You can get Bitcoins by:
‘Mining’ them – this process refers to the act of solving mathematical problems, earning Bitcoins in exchange.
- Receiving them as payment from someone.
Buying Bitcoins from an online exchange.
What are other types of digital currency?
Litecoin – a ‘peer-to-peer’ internet currency with which you can make cheap payments all over the world.
Ripple – this allows banks to transact with each other using financial technology.
Are digital currencies safe?
To a degree. Digital currencies aren’t regulated or supported by banks or governments, so if you have your currency stolen, there’s probably not a lot you can do. It’s a good idea to use a well-known currency like Bitcoin, as well as keeping on top of trends in digital security.
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