We now live in a digital world where almost everything is now digitalized. Even money itself has now become a become a digital currency. From the looks of this, cash may not be present forever, because there’s been a recent switch in modes of payment which can cause the extinction of cash. This recent development is Digital currency (or money).
What is digital currency?
Digital currency (or money) is a form of money or means of payment that is available in only electronic or digital form. It is not physically tangible because they’re in electronic form and can only be accessed with computers or mobile phones with an internet connection. Digital currencies are stored in a centralized or decentralized ledger or block-chains.
Characteristics of digital currency
- As stated earlier, digital currencies only exist in electronic/digital form. They don’t have any physical form.
- Digital money can be in centralized or decentralized currency form. An example of a centralized form is the Fiat currency. A decentralized form of currency example is Cryptocurrencies such as Bitcoin.
Types of digital currency
Different types of digital currencies exist in the digital world. Here are 2 major types of digital currency;
- Cryptocurrency: this is a digital token that is unregulated and exists in digital form. It allows people to make payments to one another through an online method. The most common examples of cryptocurrencies are Ethereum, Bitcoin, and Litecoin.
- Central Bank Digital Currency(CBDC): it is a digital money form that is granted by a central bank and can be accessed by the populace.
Benefits and risks of digital currency
Digital currencies can be favorable or unfavorable in the financial world.
Some of the benefits of digital currencies include;
- Speedy deals– deals are faster than the traditional form of payment because the transfer of available funds is made easier through online approaches.
- No extra fee charge– compared to traditional financial institutions that include an extra fee on every transaction made, the use of digital currencies requires no extra fee charged for any transactions made.
- Funds tracking– since transactions are made online, you can track your funds for any payment made.
- Easy accessibility– digital currencies (or money) can be used by anyone since it is done online.
Some risks of using digital currency are;
- Exposure to hacking– since digital currencies are operated online, they’re vulnerable to hacks, and most times funds are stolen.
- Instability– most digital currencies are decentralized meaning they are not backed up by central banks or the government. This makes them unstable and may lose or gain value quickly.
- Criminal accessibility– criminals can scam or exploit individuals with the use of digital currencies because they are easily accessible. They can use digital currencies for laundering money or illegal activities.
Future of digital currency
Digital currencies represent the future of finance. Therefore, governments and central banks of countries all over the world are on the look to create their digital currency.
Digital currencies, since their launch, offer flexibility in terms of easy accessibility to every individual. It will also help to build the economy of the country because it will be economical, and serve as a quick and easy mode of transaction.
Digital currency can help to improve trade and also open up multiple chances to improve the financial state of countries.
Conclusion
Due to innovations and digitization of the world now, it can be said that even money is moving in the digital direction. Digital currencies are the future of money/finance. Digital currency is not physical but is available in digital forms making the world a less stressful place by making transactions easy and faster!
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