The primary thought behind the creation of cryptocurrency is the possible change in the global mindset about how the currency works and the implementation of the widespread use of decentralized digital currency. For example, Satoshi Nakamoto, the founder of Bitcoin, believed in ensuring fast transaction processing.
The innovation changed the social idea about currency; however, judging from the number of daily transactions, it is hard to say that the inventors have achieved their desired amount of success. But the idea to create an alternative to the currency that the government controls are groundbreaking.
The creation of Bitcoins was to avail some new advantages to the users that the normal currency cannot. This article will tell you about certain advantages or benefits of digital currency that distinguish it from traditional currency.
What Is Digital currency?
The digital version of currency that is exclusively available in the electronic form is generally digital currency. It also goes by a few other names like digital money, electronic currency, cybercash, etc. One can use digital currencies only through computers and mobile devices.
Currency in digital form has gained dominance over multiple countries. For instance, digital currency has prominent use in the US. Only one-tenth of the total currency circulates in the form of cash in the US.
Digital money or currency never takes the form of physical cash. For example, you can use an ATM to check or withdraw cash from your account, but you only have to use your digital currency only in digital transactions since they stay in digital form in the network.
The benefits of digital currencies like Bitcoins and Ethereum and their decentralized method of transaction made many governments around the globe interested in the creation of digital currencies of their own.
Different Traits Of Digital Currencies
- The digital currencies do not take physical form, and they stay in the digital format in a decentralized blockchain network and can only be transferred and used digitally.
- The digital currency exchange does not support or require the exchange of physical objects. The currency can be used to transfer value.
Different Types Of Digital Currencies
The term digital currency does not limit itself to one single currency. Instead, multiple types of digital currencies differ in qualities and usages. Here are three different types of digital currencies.
Cryptocurrencies use cryptography to secure and verify money transactions in a certain network. The creation and management of cryptocurrencies do also require the use of cryptography. Some of the most uttered names in cryptocurrency include Bitcoin, Ethereum, Dogecoin, etc.
Virtual currencies are unregulated currencies in digital form that a particular organization of developers control. The virtual currency also involves multiple stakeholders in the process.
Central Bank Digital Currency
The regulated digital currency that the central bank of certain countries issues is called central bank digital currency. The general idea of the CBDC is to replace the traditional fiat currency.
Benefits Of Digital Currency
There are many benefits of using digital currencies. Here are some of them-
Digital currencies do not require any intermediaries for making any transfer or transaction. The reason behind this is that the currencies exist in the same network. The result of this process shortens the amount of time that a transaction may take.
The digital currency transfer between two parties is very instantaneous, and the transaction cost is negligible. Moreover, digital currency transactions keep a minute record of the transactions made by a user, and the process is very transparent, giving the users peace of mind about security.
Does Not Require Physical Manufacturing
The digital currencies do not require any physical manufacturing, thereby cutting off the expenses in manufacturing. Since they have no physical form, the digital currencies are immune to any physical defects or damages. The production of bitcoin requires a process called bitcoin mining.
Can Reduce Transaction Cost
Digital currency supports the direct exchange of currency within the same network. Anyone can pay another person as long as both of them exist in the same network. The transaction cost in digital currency transactions is relatively lower than that of traditional currency or fiat currency.
Makes Monetary And Fiscal Policies Easier
The federal government utilizes a series of intermediaries, such as financial institutions and banks, to circulate money into an economy. The implementation of central bank digital currency can allow the government to facilitate the distribution of money into an economy while avoiding intermediaries.
Digital currency is still struggling to find its way into the traditional model of currency usage. Hopefully, the use of digital currencies will grow. Although, most of the world will still view it as a secondary mode or an alternative to the traditional currency.
The bitcoin users use moon bitcoin cash, a bitcoin faucet, to earn more bitcoins.
As beneficial as it may be, most people need access to digital currency for it to gain popularity in the mainstream mode of transaction. Let me know your thoughts about how far the benefits of digital currency will take it.