What is a Digital Currency?
A Digital Currency is often mentioned in various terms, namely digital money, electronic money or electronic cash) is a form of money like asset that is primarily managed, stored and maintained by means of digital systems, especially over the internet.
Types of digital currencies include,
- Cryptocurrency – A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not
reliant on any central authority, such as a government or bank, to uphold or maintain it. Individual coin ownership records are stored in a digital ledger, which is a computerized database using strong cryptography to secure transaction records, to control the creation of additional coins, and to verify the transfer of coin ownership.
- Virtual Currency – Virtual currency, or virtual money, is a digital currency that is largely unregulated and issued and usually controlled by its developers and used and
accepted electronically among the members of a specific virtual community. In 2014, the European Banking Authority defined virtual currency as “a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency, but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically.
- Central Bank Digital Currency – A central bank digital currency (CBDC) (also called digital fiat currency or digital base money is a digital currency issued by a central bank, rather than by a commercial bank.
Digital currency may be recorded on a distributed database on the internet, a centralized electronic computer database owned by a company or bank, within digital files or even on a stored value card. Digital currencies exhibit properties similar to traditional currencies, but generally do not have a physical form, unlike currencies with printed banknotes or minted coins. This lack of physical form allows nearly instantaneous transactions over the internet and removes the cost associated with distributing notes and coins. Usually not issued by a governmental body, virtual currencies are not considered a legal tender and they enable ownership transfer across governmental borders.
This type of currency may be used to buy physical goods and services, but may also be restricted to certain communities such as for use inside an online game.
Digital money can either be centralized, where there is a central point of control over the money supply (for instance, a bank), or decentralized, where the control over the money supply is predetermined or agreed upon democratically.
World’s famous Crypto & Digital Currencies,
Market cap: $700 billion
As the harbinger of the cryptocurrency era, Bitcoin is still the coin people generally reference when they talk about digital currency. Its mysterious creator — allegedly Satoshi Nakamoto — debuted the currency in 2009 and it’s been on a roller-coaster ride since then. However, it wasn’t until 2017 that the cryptocurrency broke into popular consciousness.
Market cap: $293 billion
Ethereum — the name for the cryptocurrency platform — is the second name you’re most likely to recognize in the crypto space. The system allows you to use ether (the currency) to perform a number of functions, but the smart contract aspect of Ethereum helps make it a popular currency.
Market cap: $78 billion
Tether’s price is anchored at $1 per coin. That’s because it is what’s called a stable coin. Stable coins are tied to the value of a specific asset, in Tether’s case, the U.S. Dollar. Tether often acts as a medium when traders move from one cryptocurrency to another. Rather than move back to dollars, they use Tether. However, some people are concerned that Tether isn’t safely backed by dollars held in reserve but instead uses a short-term form of unsecured debt.
Binance Coin (BNB)
Market cap: $62 billion
Binance Coin is the cryptocurrency issued by Binance, among the largest crypto exchanges in the world. While originally created as a token to pay for discounted trades, Binance Coin can now be used for payments as well as purchasing various goods and services.
USD Coin (USDC)
Market cap: $48 billion
Like Tether, USD Coin is a stable coin pegged to the dollar, meaning that its value should not fluctuate. The currency’s founders say that it’s backed by fully reserved assets or those with “equivalent fair value” and those assets are held in accounts with regulated U.S. institutions.
Market cap: $35 billion
Cardano is the cryptocurrency platform behind ada, the name of the currency. Created by the co-founder of Ethereum, Cardano also uses smart contracts, enabling identity management.
Market cap: $30 billion
Launched in March 2020, Solana is a newer cryptocurrency and it touts its speed at completing transactions and the overall robustness of its “web-scale” platform. The issuance of the currency, called SOL, is capped at 480 million coins.
Market cap: $29 billion
Formerly known as Ripple and created in 2012, XRP offers a way to pay in many different real-world currencies. Ripple can be useful in cross-border transactions and uses a trust-less mechanism to facilitate payments.
Market cap: $26 billion
Using its currency Luna, Terra is a platform that helps backstop a range of stable coins based on real currencies such as the dollar or euro. Terra helps stabilize the price of stable coins through various technical means, and it also supports smart contracts.
Market cap: $19 billion
Originally created as a joke after the run-up in Bitcoin, Dogecoin takes its name from an internet meme featuring a Shiba Inu dog. Unlike many digital currencies limiting the number of coins in existence, Dogecoin has unlimited issuance. It can be used for payments or sending money.
Market cap: $19 billion
Launched in May 2020, Polkadot is a digital currency that connects the technology of blockchain from many different cryptocurrencies. A co-founder of Ethereum is one of Polkadot’s inventors, and some industry watchers believe Polkadot is looking to dethrone Ethereum.
Market cap: $16 billion
Avalanche is a fast and low-cost smart contracts-based blockchain platform focused on building decentralized apps and facilitating the creation of custom blockchains. Its users can process transactions in the native AVAX token.
In December 2019, the Central Bank of the Bahamas launched the Sand Dollar project on the island of Exuma. After the successful pilot in Exuma, the digital currency fully launched across the country in October 2020. The sand dollar is the first ever nationwide Central Bank Digital Currency in the world. Now, the Central Bank is working on achieving full interoperability between its various wallet providers
The Eastern Caribbean Central Bank (ECCB) launched its digital currency DCash in March 2021 in 4 of its 8 member states. With DCash, the Eastern Caribbean has become the first currency union central bank to issue digital cash. The digital currency pilot is available for use by the public on their smartphones. Consumers and merchants can utilize the DCash App or use it through participating financial institutions. Since launching in March, the CBDC has expanded to 3 more territories. Currently it is available in all members of the ECCB except Anguilla.
At the launch of e-Naira, the Central Bank of Nigeria governor, Godwin Emefiele, said 500 million eNaira ($1.21 million) had already been minted. Currently only bank account holders can access the e-Naira by signing up with Nigeria’s BVN bank identity. The next phase of the rollout will include the unbanked using Nigeria’s national identity NIN, which has now reached 60 million signups. Based on the level of identity provided, a higher transaction limit for the eNaira is allowed. With a phone number and verified national identity, users can make payments of up to 50,000 Naira ($121) a day, rising to 200,000 ($484) for the lower level of bank-approved account.
Crypto Currency vs Digital Currency
Digital currency vs Cryptocurrency
This is an era of the rapid transformation of a digital economy where everything is organized into bits. Any activity done in the sphere of the digital platform can be shared, accessed, and propagated into analog form. So how couldn’t currency enter into its communities? In 1990, the first electronic cash company DigiCash was founded in Amsterdam, however, the company failed due to bankruptcy. Although the impact wasn’t too severe but the discovery of the digital currency amazed millions of citizens. That’s how the term Digital Currency came into the world denominated into its own units. Since the development of technologies decentralized currency exchanged platform, the arrival of Cryptocurrency is not new. Cryptocurrency uses strong cryptography, typically a blockchain when it comes to serving financial database exchanges. If you misunderstood their roles and work, then this is the time to explore major differences
Digital Currency- A Unified Electronic Cash
According to the European Central Bank, this is the digital representation of the cash recorded electronically into debit or credit cards. Digital currencies exhibit similar properties as physical currencies that are used and accepted by the virtual committees’ members. More than 100 years ago when paper dollar bill backed by the silver coins no one could estimate the influence of digital currency at such a huge level. In the present climate, the digital currency became an open-source of contactless payment gateways between the traders. Consequently, it ensures the intangibility of the currency that you can save into your electronic wallets afterward. Even though these currencies exist in the digital world, they can be exchanged in the cash mode also. Subsequently, there are unique advice on digital currency provided by assignment help services that you can use for a better understanding of the subject.
Cryptocurrency- An Encrypt Form of Digital Currency
The first decentralized cryptocurrency (Bitcoin) created by Developer Satoshi Nakamoto in 1990 that used cryptography hash function. As Coinformant built a comparison for Australia to analyse cryptocurrency strength, it deduced this is the most secured, encrypt, algorithm powered currency based on the blockchain technology. Blockchain is pathways maintain the integrity of the transaction flow. It is praised for its independence, portability, inflation resistance, and secured gateways. These entire features of cryptocurrencies and its security advancement influence the users to a great extent. There are almost 2000 most popular cryptocurrencies including Bitcoin, Ethereum, XRP, and Litecoin, which encouraged developers to work on the cryptocurrency. If you are eager to know more about bitcoin history, you can seek essay writing help service available over the internet.
Digital Currency Vs Cryptocurrency
Aligning cryptocurrency and digital currency on the same platform could be a huge mistake that could happen if you won’t draw the distinction. Cryptocurrency is a subset of digital currency but not its identical twin. From the fastest port of transaction to the development of blockchain technology, cryptocurrencies ensure a high degree of privacy and secure transactions. Nonetheless, many economists didn’t approve cryptocurrency as it fluctuates widely.
India’s own Digital Currency
In July 2021, the Reserve Bank of India announced that it was working towards a phased implementation of a digital rupee, citing the importance of maintaining India’s lead in digital payments infrastructure. Shri T Rabi Sankar, Deputy Governor, listed for debate in the current parliamentary session, seeks “to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.” In mid2019, a government panel recommended banning all private cryptocurrencies, with a jail term of up to 10 years and heavy fines for anyone dealing in digital currencies.
The panel did, however, ask the government to consider the launch of an official government-backed digital currency in India, to function like bank notes through the RBI. In February 2021, the RBI released a report describing the pros and cons of a digital currency. Although they acknowledged the potential financial inclusion benefits, they also claimed introduction of a CBDC could lead to disintermediation in the banking sector. In March 2021, RBI Governor Shri Shaktikanta Das noted, “As the underlying technology is still developing, we are exploring ways for a clear, safe and legally certain settlement finality, which is most crucial for a secure and efficient payment system.” In July 2021, the RBI announced that it considering a series of pilot studies for an eventual “phased” rollout of a CBDC.al of every central bank going forward.”
As discussed above, confirming that India’s central bank will launch a digital version of the rupee in the next financial year, the country’s finance minister said on Tuesday.
“Introduction of a central bank digital currency will give a boost, a big boost to the digital economy,” Nirmala Sitharaman said as she delivered the country’s annual budget. “Digital currency will also lead to a more efficient and cheaper currency management system.” The Reserve Bank of India will introduce the digital rupee in the 2022-2023 financial year which begins on Apr 1.
Sitharaman gave no details about how the digital rupee would work or what it would look like, but said it would be introduced “using blockchain and other technologies.” Blockchain refers to the technology that was originally created alongside bitcoin, but the definition has since evolved as its applications have moved beyond cryptocurrencies. India would be one of the world’s largest economies to introduce a so-called central bank digital currency (CBDC) if it sticks to its plans.
Advantages of Digital Currencies
- Reduced dependence on cash.
- Economical savings on printing and transportation cost.
- Easier and safer way of transporting.
- Strong Settlement mechanism.
- Removal of time zone barrier in forex transactions.