Digital currencies are intangible and can only be owned and trans- acted in by using computers or electronic wallets connected to the Internet or the designated networks. In contrast, physical currencies, like banknotes and minted coins, are tangible and transactions are possible only by their holders who have their physical ownership.
Like any standard fiat currency, digital currencies can be used to purchase goods as well as to pay for services, though they can also find restricted use among certain online communities, like gaming sites, gambling portals, or social networks.
Digital currencies have all intrinsic properties like physical currency, and they allow for instantaneous transactions that can be seamlessly executed for making payments across borders when connected to supported devices and networks.
For instance, it is possible for an American to make payments in digital currency to a distant Since they exist in a lot of variants, counterparty residing in Singapore, provided that they both are con- nected to the same network required for transacting in the digital currency.
Digital currencies offer numerous advantages. As payments in digital currencies are made directly between the transacting parties without the need of any intermediaries, the transactions are usually instanta- neous and low-cost. This fares better compared to traditional payment methods that involve banks or clearing houses. Digital currency based electronic transactions also bring in the necessary record keeping and transparency in dealings.
Difference between Digital, Virtual, and Crypto Currencies digital currencies can be considered a superset of virtual currencies and cryptocurrencies.
If issued by a central bank of a country in a regulated form, it is called the “Central Bank Digital Currency (CBDC).” While the CBDC only exists in conceptual form, England, Sweden, and Uruguay are a few of the nations that have considered plans to launch a digital version of their native fiat currencies.
Along with the regulated CBDC, a digital currency can also exist in an unregulated form. In the latter case, it qualifies for being called a virtual currency and may be under the control of the currency developer(s), the founding organization, or the defined network protocol, instead of being controlled by a centralized regulator. Examples of such virtual currencies include crypto currencies, and coupon- or rewards-linked monetary systems.
A crypto currency is another form of digital currency which uses cryptography to secure and verify trans
for some falsified reason. Businesses often look at this as a cost of doing business.
actions and to manage and control the creation of new currency units. Bitcoin and Ethereum are the most popular crypto currencies.
Essentially, both virtual currencies and crypto currencies are considered forms of digital currencies.
Seven benefits of using digital currencies
Unless you’ve been living under a rock, you’ve probably seen the news none. about the strong market performance of bitcoin and other digital currencies.
Bitcoin was valued at less than $1,000 on December 31, 2016 and has crossed more than $2,700 as of this writing. Other digital currencies, called alt coins, have also seen an increase in value, sometimes at a higher percentage than bitcoin.
Bitcoin is based on the block chain. Block chain is a distributed data base that supports bitcoin and other digital currencies. It allows for an immutable record of transactions that are pseudo-anonymous and decentralized through millions of computers around the world. Bitcoin and other digital currencies operate with block chain technology so trust is in mathematics rather than a third party.
Benefit # 1 Lower transaction fees
Credit card charges can be very steep, particularly with international use. They can range from 2 percent to 5 percent or more on transactions. I always feel the pain when I end up paying a few hundred dollars in transaction fees to accept payments from my clients who are in other countries. By using the block chain, bitcoin and other digital currencies, you pay a much lower fee, sometimes
Benefit # 2 No charge backs
By using bitcoin, you stop the fraud that comes from charge backs. Sometimes customers will purchase a product and use it, then ask for a full refund from the credit card company
By accepting payments in bitcoin, there are no charge backs. The sale is complete when you receive the transaction from your customer. Of course, as a good business, you can refund where you deem it to be a good business decision. It is nice to know that you’re not required to give a chargeback when you believe fraud is involved.
Benefit # 3 Faster receipt of funds than through legacy financial institutions
I mentioned earlier a problem with the fees associated with international transactions. That is bad enough, but the pain is exacerbated when it takes days or sometimes weeks to see the funds appear in my bank account.
The speed of processing transactions is usually completed within a few minutes, though lately, with the increased use of bitcoin, we have seen a slowdown. Nevertheless, it is still much faster than transaction times with legacy financial systems. Think of it like the speed of sending an email vs. sending a letter through snail mail.
Benefit # 4 No inflation
This is a big problem in many Third World countries, where central banks inflate their currency to try to keep their head above water. We also see it
If a thousand men were not to pay their tax-bills this year, that would not be a violent and bloody measure, as it would be to pay them, and enable the State to commit violence and shed innocent blood. This is, in fact, the definition of apeaceable revolution, if any such is possible.
(Henry David Thoreau)