In today’s world, digital currency refers to any form of currency that only exists electronically, unlike physical coins or notes. Similarly, digital goods are products and services that can only be bought, sold, and delivered online. They do not exist physically and cannot be handled but can be downloaded online. Due to their convenience and accessibility, many individuals and businesses prefer buying and selling digital goods such as software applications, music, e-books, and online courses.
Types of digital currencies
Cryptocurrency
Cryptocurrency uses cryptography and an encrypted data string that denotes a currency unit. Blockchain technology is used to secure, verify, create, and manage these transactions. Examples of cryptocurrency include Bitcoin and Ethereum, which could be regulated or unregulated based on local laws.
Stablecoins
A stable coin is a cryptocurrency whose value is linked to stable assets like gold or currencies like dollar or euro, making it less volatile than unregulated currencies.
Central Bank Digital Currency (CBDC)
CBDCs are regulated digital currencies that the Central Bank of a country issues. Since they are regulated, they can replace or supplement traditional currencies.
What are digital goods?
Digital goods are digital products that may not have a physical form but can be bought and sold online. Some examples of digital goods are media files, music albums, video files, software, internet radio and TV, digital subscriptions, coupons, digital fonts and logs, and images.
What are virtual digital assets?
Digital assets refer to authentic digital holdings that are encrypted on the blockchain. You can confirm and determine the ownership of such digital assets. You cannot hack, copy, or replicate these unique assets. Examples of such virtual digital assets include cryptocurrencies, Non-Fungible Tokens, and Decentralized Finance. Virtual digital assets offer benefits like transparency. They are decentralized, secure, and easily accessible.
Characteristics of digital currency
Digital currency is gaining popularity and acceptance as it has many features that do not exist in regular currency. Some of the main characteristics of digital currency include:
Anonymity
Since transactions use encrypted codes rather than an owner’s identity, it provides anonymity, making it impossible to link them with individuals and organizations.
Decentralization and deduced governmental control
The reduced control and supervision by government bodies eliminates fees and restrictions. It also reduces any control by a financial institution or manipulation.
Accessibility
Since these are virtual, you can access your currency from anywhere in the world with an internet connection.
Easy transfers
One has to go through multiple processes, checks, and balances to transfer fiat currencies, and it may also take some time to complete a transfer. Since digital currency transfers are virtual, you can immediately transfer the currency to anyone.
Security
Digital currencies are held in virtual wallets with a strong private key making it difficult for others to access.
Faster conversion
Cryptocurrencies can be converted or exchanged to dollars or euros using many virtual tools and solutions.
Uses of digital currency
Cryptocurrency can be used like physical currency, though it has not yet become mainstream. However, many businesses do allow payments in cryptocurrency. Investing in cryptocurrency can also offer diversification to your portfolio. It can be used like any other payment method to purchase goods and services, and some online communities, gaming sites, and gambling sites also accept cryptocurrency. Additionally, trading cryptocurrency can potentially lead to profits. Transactions made with cryptocurrency are verified and recorded on a blockchain ledger, which tracks your transactions precisely and cannot be reversed.
