Digital currency or digital money is an internet-based way of exchanging value, similar to physical money but without physical properties (i.e. there are no tangible bank notes or coins for the currency). It allows for carrying out instant transactions and borderless transfer-of-ownership.
It uses decentralised ledger, which means that original ledger is updated and copied everywhere, instantly. It has two main technologies to prevent fraud (from double-spend and unique access to ledger) – ‘proof of work’ and ‘elliptic curves’. Bitcoin was the first decentralised digital currency created 2009 and it has had mixed reception and reviews.
Advantages of digital money:
- Fast – the ‘velocity’ of money
- Weighs nothing and you don’t have to carry it around
- International and borderless
- Allows for easy accounting
- Cheap – no government issuance and protection etc,
- No fees for use of technology – uses open source code
- Fuel for permissionless innovation – no need to ask to use it.
Weakness of digital money:
- No cash, only access to ledger units, as a blockchain
- Truly public, no privacy at all.
- Still an infant currency and is relatively easy to steal and is unstable