Digital & virtual currency

Digital & virtual currency

There are two major forms of digital currency.Digital currency is the overall superset that includes virtual currency, which in turn includes cryptocurrencies.Compared to virtual currency, a digital currency covers a larger group that represents monetary assets in digital form.Digital currency can be regulated or unregulated.In the former case, it can be denominated to a sovereign currency—that is, a country’s central bank can issue a digital form of its fiat currency notes.On the other hand, a virtual currency often remains unregulated and hence constitutes a type of digital currency.

Virtual currency is digital currency that is used within a specific community.For example, all FarmVille players have access to the in-game virtual currency coins with which they can purchase items for their farm.Virtual currency though is only valid within the specified community.You can’t take your FarmVille coins and use them to buy a hamburger from McDonald’s.Therefore, it has no real world value.

Cryptocurrency, on the other hand, is digital currency that does have real world value,like Bitcoin.This type of digital currency is based on mathematical algorithms with tokens being transferred electronically over the internet via peer-to-peer networking.A benefit to cryptocurrency is that it is not tied in to the economy of any one country.This form is decentralized, and doesn’t rely on any one regulatory agency.This means that if the economy of one country crashes, your digital currency will remain the same.With no regulatory agencies to go through, cryptocurrency makes it easier to conduct international transactions.It can also be exchanged for any type of physical currency.And it is completely private.Though transactions are digitally confirmed, they are anonymous.Your personal details are never attached to your transactions, so there is no money trail as there is with some physical currency.

Transactions of cryptocurrency are also irreversible.You know how if you deposit a fake check, the bank will then reverse that transaction and take that money back out of your account? This can’t happen in cryptocurrency.There is little room for mistakes as all transactions are conducted via complex algorithms that transfer tokens from one person to another.Though all this privacy is usually considered a good thing, cryptocurrency has also been used for illegal transactions such as money laundering and purchasing illegal drugs.It has also been connected with ransomware, which is when a virus hijacks your computer and demands payment in cryptocurrency to release your data.