Digital Currency

First of all, let's understand what is digital currency?

Digital currency are currency with no physical attributes and are available only in digital form. So if we need to do transaction with them we use computers or electronic wallets which should be connected to internet or a particular network.

Types:

Central bank Digital Currency : regulated by central bank of a country. It can somewhat replace or be an alternative to traditional fiat currency. China has e-CNY, a digital version of fiat currency.

Virtual Currencies : unregulated digital currency that is controlled by developers or founding organization. An example of this is gaming token whose economics is defined and controlled by developers.

Cryptocurrencies : They are digital currency that use cryptography to secure and verify transactions in a network. They may or may not be regulated depending on the law and policy of different countries.

Benefits of Digital Currency :

- They are very fast in transaction as they are done with the help of internet. The transaction data travel via internet.

- They do not need physical printing and manufacturing of currency.

- They are free from damaging and not immune to physical defects.

- They help in easy monetary implementation and make things easier to monitor.

Risks of Digital Currency :

- They are very risky in terms of security. As hackers can steal digital currency from online wallets or change the protocol of currency. And we have heard of numerous cases of hacks in cryptocurrencies.

- They can be volatile. Stability of currency is depends on the faith of people on the currency and strength of the currency. So they may have wild price swings.

- Uncertainty for the future. People are used to on the fiat currency and they believe a currency regulated by third party regulatory body is more reliable than on something regulated by computers and algorithms. So it is not sure how long do they exist.

- Transaction for illegal cases may increase. The combination of the level of anonymity it affords, ease of use, and ability to circumvent international borders and legislation

Comments

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