What Is A Digital Currency? Concept And Types
With the advent of the technological age, new ways of exchanging value are continually appearing . The most popular and most important Digital Currency is Bitcoin, but there are many others. Cryptocurrencies are not the only digital currencies that exist, far from it. They are simply another type of digital assets that have monetary value and that work thanks to certain characteristics that make them a specific market.
Cryptocurrencies and all other forms of digital currency are digital assets. Within this nature they would also be in the category of monetary goods because they can be used for the acquisition of products and/or services.
In the company, on the other hand, we can define a digital asset as any intangible possession that the business has and needs a computer system for its use. Therefore, a digital currency is only one of the many digital assets that a company can own.
On the other hand, digital currencies should not be confused with digital financial assets, which would be all those financial instruments available through the network.
Cryptocurrencies and all other forms of digital currency are digital assets. Within this nature they would also be in the category of monetary goods because they can be used for the acquisition of products and/or services.
In the company, on the other hand, we can define a digital asset as any intangible possession that the business has and needs a computer system for its use. Therefore, a digital currency is only one of the many digital assets that a company can own.
On the other hand, digital currencies should not be confused with digital financial assets, which would be all those financial instruments available through the network.
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What is special about a digital currency?
All those digital assets that meet the characteristics that money must have are considered digital currency. For example , Bitcoin has all the properties that a currency should have. It can be transferred, retains its value, and is divisible. However, there are many other types of digital currencies. Next we will see what they are and see their differences.virtual currency
They are the best known and most widely used type of digital currency. It is simply about all those currencies that we use through the network but that cannot be exchanged for other currencies. The best-known example would be that of video games, a sector that is increasingly linked to this type of asset. Any console or computer game in which we have to accumulate assets to later buy other things with them makes use of these virtual currencies. The most popular and understandable example would be that of the FIFA video game saga, where users can get and save virtual currencies by buying and selling players in a fictitious market that simulates the real soccer market.The new generations are very used to dealing with digital currencies. For this reason, they will be the ones that best adapt to the other types of digital money that we are going to analyze below.
digital currency
A digital currency would be any currency that is represented through computer systems. For example when we use an electronic payment company such as PayPal . On this occasion we are not using virtual currencies, but rather our dollars (or any other currency) that are involved in the operation. What happens is that instead of delivering paper money by hand, the delivery is done digitally. Therefore what really changes is the accounting note.The use of digital currencies and currencies is widely extended and standardized in the world. However, cryptocurrencies, due to their special characteristics, still have a long way to go to be adopted on a massive scale. Therefore, it is important to know the fundamentals that each asset and thus know how to distinguish them in the correct way.
cryptocurrencies
Cryptocurrencies like Bitcoin have their own market and their own fundamentals. This is mainly because they are digital currencies based on two principles of technology:- They work through their own decentralized network. The accounting book is public and decentralized and is made up of information stored in blocks kept by the different nodes that make up the network.
- Use cryptography. It is based on the cryptographic security and authentication system to make use of technologies such as electronic signatures or public and private keys.
Tokens
' Tokens ' are commonly confused with cryptocurrencies, but they have different characteristics. They are also digital assets, but their use is not really to be used as currency. Rather, its function is to represent some other asset within a network or to serve as a utility for the performance of certain functions. There are three main types of tokens:- utility tokens. They exist to fulfill a certain function, they have another use than to be used as a means of payment.
- Financial tokens. They represent some kind of contract related to the financial world.
- Non-fungible assets. They are tokens that cannot be divided. They have unique characteristics that make them collector's items.
CBDCs
Finally, and as a 'bonus track', we can talk about the 'Central Bank digital Currency' or CBDC. That is, the digital currencies of central banks. There is a very important link between this type of digital monetary assets and cryptocurrencies, but they cannot be considered cryptocurrencies as such. Nor would they fall under the category of digital currency.It is a hybrid project in which the Governments and the Central Banks are currently working and which aims to create digital currencies that use blockchain technology but can be controlled. In this way, unlike what happens with Bitcoin and other cryptos, the maximum supply or the number of circulating coins can be modified according to the needs of economic policy. Also another project known as Ripple , which would be somewhere between cryptocurrencies and CBDCs.
