VIRTUAL CURRENCY
Virtual currency is a type of unregulated digital money which is issued and usually controlled by its developers. It is used and accepted among the members of a specific virtual community.
Virtual currency is used to purchase real-world goods and services, but has no legal tender status in some countries.
It is not recognized as a medium of payment by legal systems such as the Federal Reserve.
VIRTUAL Vs REGULAR MONEY
• Unlike regular money, it is relies on a system of trust and not issued by a central bank or other banking authority.
• Convertible virtual currency usually has a measurable value in real money, but what makes it convertible lies in its ability to be exchangeable.
• Virtual currency can be converted to cash through online exchanges which act as brokers. Exchanges such as Coinbase and Bitstamp enable users to exchange their Bitcoins for their local currency.
• Convertible virtual currencies can also be exchanged for real currency using Bitcoin ATMs which are only available in select countries.
VIRTUAL VS. DIGITAL CURRENCIES
Virtual Currency
• All virtual currencies are digital, but the opposite is incorrect.
• Virtual currencies started to expand to the physical world and therefore blurred the line between virtual and digital money.
• Virtual currency has a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency.
• It is accepted by natural or legal persons as a mean of payment.
• It can be transferred, stored or traded electronically.
Digital Currency
• A digital currency that is issued by a central bank is defined as "central bank digital”.
• It is stored and transferred electronically.
• Other digital currencies, meanwhile, are redeemed for physical goods and services all the time.
CRYPTOCURRENCIES
A lot of virtual currencies exist and most of them are cryptocurrencies (digital currencies in which encryption techniques are used). Each virtual currency has its own way of functioning and its own founder(s), its algorithms and a varying level of anonymity.
Cryptocurrencies are designed to replace cash.
BITCOIN
Bitcoin, the world’s first web-based currency, is the most “settled” currency in terms of Market Capitalization and popularity.
It was released in January 2009 by Satoshi Nakamotoon, who until today has not been identified.
Bitcoin today still accounts for approximately 90% of total Market Capitalization which consists of more than 650 virtual currencies.
It can also be spent at physical businesses.
In April 2018, 1 Bitcoin worth around 8.400 USD and can be cashed back through transaction via deposits or wires to your bank account, after which you are expected to transfer the agreed amount of bitcoin to the specified address.
BITCOIN’s BLOCKCHAIN
Bitcoin is making use of peer-to-peer-technology, its spending process occurs collectively through a network.
Every payment gets encrypted by a unique secret key and is sent from one address to another over the blockchain, which is a decentralized public register that tracks everyone’s bitcoins.
FUTURE
Virtual currencies will mark the start of a new era, in which technology as a currency will gradually take its place in the traditional payment environment.
As banks go online, physical cash is becoming antiquated and electronic money has already taken over, but it is expected that within the following years virtual currencies can disrupt the traditional system.
Because bitcoins have not yet proven to be a good store of value, banks are unlikely to adopt bitcoin as a currency. Its decentralized system of use and the associated low costs are not to be ignored.
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