Digital Currency – Currency of the 21st century

Digital Currency

 

Advancement in technology has brought about series of innovations in the financial world. This development has brought about paradigm shift in the financial world. One of the most recent and trending technological innovation in the financial world is the emergence of Digital currency.

What is Digital Currency?

Digital currency is one of the 21st century technological innovations. It is often referred to as internet based money. It is a method of payment that only exists in electronic form. This currency is not tangible and can only be transferred between entities using technological devices like computers, smart-phones and the internet.

Digital currency has been in existence for over 20 years and as at today; about 700 different digital currencies are in existence. Reports by the International Monetary Fund (IMF) disclosed that the total value of digital currencies in 2015 amount to about 7 billion US dollars. It is a known fact that digital currency is growing rapidly as a medium of exchange around the world today. In the world today, digital currency can be used to purchase goods and services. However, there are still restrictions as to the extent to which these currencies can be used in certain online platform. Examples of such platforms are; gaming websites and social networks. Digital currency is also known as digital money or cyber cash.

Differences between Digital currency and Physical Currency

Physical currency is a medium of exchange that represents the monetary value that is being stated therein which is ascertained by the issuing authority or Central Bank as the case may be. Physical currencies are always recognized exchange medium within a country and can also be used in the international community among nations. They are highly regulated and their value remains the same within a country; however they may varies in value compare to that of other countries. This is usually caused by factors like; inflation, political stability, growth rate etc. The distinguishing feature of physical currencies is the fact that they are always liabilities on the issuing country’s government and they are always regarded as the legal tender of that country.

While digital currencies on the other hand are not a liability to any individual, government or corporate organizations. They are not regulated and merely a digital asset issued and controlled by the developers and can be accepted in a business transaction if the parties involves are in support. The value of digital currency at any given time is a function of demand and supply forces interplay. In other words, if the demand of a particular digital currency is high, the value will appreciate or high and if the demand reduces, the value depreciates.

No country around the world has accepted digital currency as a legal tender for now, there is still hope that in the future some countries may accept it.

Features of Digital currency

Digital currency has certain unique and exceptional features that make it different from other forms of currency. Some of these features are discussed below;

Value Determine By the Forces of Demand and Supply

One of the features of digital currency is the fact that the value of the currency is determined by the forces of demands and supply interplay. In other words, if the supply is limited, the value will be high and if the supply is surplus the value will fall.

They are not Liability

Unlike physical currency, digital currency is not a liability to any individual, corporate entity, government or Central Bank. If the currency is performing excellently people that trade with it enjoy it and if it performs poorly, the same people bear the lost.

Not Identifiable Issuer

Digital currency does not have an identifiable issuer or intermediary that carry out transactions. Each units of digital currency is issued based on established computer protocol.

Method of Storing

The method of saving/storing digital currency is completely different from other forms of documents. This is due to the fact that owners of digital currencies keep their currencies in digital wallets with computer programme keys to identify the owners. The keys are unique and two individuals can never have the same digital wallet key.

Cost Effective Transaction

Whenever digital currency is used as a medium of exchange in any transaction, such transaction is very fast and cost effective. The cost effective nature of digital currency makes it a perfect choice for most people around the world.

What are the Benefits of Using Digital Currency?

Lower Transaction Fees: This is one of the reasons why people around the world still yearn for digital currency for transaction purpose even if the currency is not regulated. Whenever digital currency is used for transaction, the transaction fees are comparatively low and sometimes there may not charge at all.

No charge back: Charge back is one of the treat that businesses around the world are facing in the 21st century. After concluding a transaction, the customer may come back with a false reason and your credit card company will refund the money back to the customer after rending your services to such person. This is very rampart in the business environment today. However, digital currency has come to reduce this risk as there are no charges back on transactions that involve digital currencies.

Faster Receipt of funds: International transactions that are conducted using digital currencies are faster than financial institutions. It takes few minute for beneficiary of a transaction to receive funds via digital currency while it takes days and sometimes weeks to receive money via financial institutions. This is one of the obvious reasons why most international traders prefer using digital currency as a means of exchange.

Makes International Transaction Easier: The fact that digital currency makes international transaction easier is one of the reasons it is becoming more popular in the business world today. It helps to eliminate the currency barriers that traders face when doing international transaction. This is because irrespective of the country your customers are based, you can always receive payment via digital currency from such customer.

Digital currency has indeed revolutionizing financial transaction in the 21st century just as the internet has revolutionalised communication.

 

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