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Digital Currency Definition

What Is Digital Currency?

Digital currency is a contract of currency that is available only in digital or electronic form, and not in physical form. It is also called digital capital, electronic money, electronic currency, or cybercash.

Key Takeaways

  • Digital currencies are currencies that are only accessible with computers or transportable phones because they only exist in electronic form.
  • Because digital currencies require no intermediary, they are oftentimes the cheapest method for trading currencies.
  • All cryptocurrencies are digital currencies, but not all digital currencies are crypto.
  • Digital currencies are competent and traded with the markets, whereas cryptocurrencies are traded via consumer sentiment and psychological triggers in price movement.

Apperception Digital Currency

Digital currencies are intangible and can only be owned and transacted using computers or electronic wallets glued to the Internet or designated networks. By contrast, physical currencies, such as banknotes and minted coins, are tangible, and transactions are made conceivable only by their holders, who physically own them.

Like any standard fiat currency, digital currencies can be used to buying goods as well as to pay for services, though they can also find restricted use among certain online communities, such as gaming spots, gambling portals, or social networks.

Digital currencies have many of the intrinsic properties of physical currency, and they concede for instantaneous transactions that can be seamlessly executed for making payments across borders when connected to supported contraptions and networks.

For instance, it is possible for an American to make payments in digital currency to a distant counterparty residing in Singapore, stipulate that they both are connected to the same network required for transacting in the digital currency.

Digital currencies make numerous advantages. As payments in digital currencies are made directly between the transacting parties without the need for any agents, the transactions are usually instantaneous and low-cost. This fares better compared to traditional payment methods that imply banks or clearinghouses. Digital-currency-based electronic transactions also bring in the necessary record keeping and transparency in dealings.

Disagreements Between Digital, Virtual, and Cryptocurrencies

Because a variety of digital currencies currently exist, they can be considered a superset of essential currencies and cryptocurrencies.

If issued by a central bank of a country in a regulated form, it is called a central bank digital currency (CBDC). Admitting that CBDC only exists in conceptual form, England, Sweden, and Uruguay are a few of the nations that have considered downs to launch a digital version of their native fiat currencies.

Along with regulated CBDC, a digital currency can also endure in an unregulated form. In the latter case, it qualifies as a virtual currency and may be under the control of the currency developer(s), the founding system, or the defined network protocol instead of being controlled by a centralized regulator. Examples of such virtual currencies group cryptocurrencies and coupon- or rewards-linked monetary systems.

Because cryptocurrencies are unregulated, they are also considered to be virtual currencies.

A cryptocurrency is another convention of digital currency, which uses cryptography to secure and verify transactions and manage and control the creation of new currency items. Bitcoin and Ethereum are the most popular cryptocurrencies.

Essentially, both virtual currencies and cryptocurrencies are considered forms of digital currencies.

Digital Currencies Practical Currencies Cryptocurrencies
Regulated or unregulated currency that is available only in digital or electronic form. An unregulated digital currency that is switched by its developer(s), its founding organization, or its defined network protocol. A virtual currency that uses cryptography to secure and back up transactions as well as to manage and control the creation of new currency units.

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