What is virtual currency and how is it different from digital currency?
With the spread of bitcoin and international bank transfers, different terms such as virtual currency, electronic currency and digital currency have spread. Although sometimes users use these terms instead of each other, but these terms are different in meaning and it is better to know the exact meaning of each. In this article, we are going to ask the question "What is virtual currency?" Answer and check the difference with digital currencies.
What is Digital Currency?
Digital currency is a term used to describe all electronic money. Digital currency includes two groups of currencies: Virtual Currency and Cryptocurrency, which can be legal or non-legal.
Digital currency is only available digitally or electronically and, unlike coins or banknotes, has no physical or external state. Digital currencies can only be maintained and spent using designated electronic wallets or connected networks. Digital currency / currency is also commonly referred to as cyber cash.
In transactions of this type of currency, transactions are mostly done quickly and without intermediaries. The cost of transactions is often free or very low.
What is Virtual Currency?
Virtual currencies are a type of digital currency that is typically controlled by developers and used and accepted by members of a particular virtual community.
It is good to know that all Virtual Currencies are a type of Digital Currency, but the opposite is not true and not all digital currencies are virtual currencies.
Virtual currency is essentially a representation of the monetary value issued, managed and controlled in peer-to-peer payments by private companies. Sometimes they may look like tokens, sometimes they may not be regulated by banks, unlike Fiat currencies. This means that virtual currencies can experience price fluctuations.
What is a digital currency (Cryptocurrency)?
The word "crypto" in "Cryprocurrency" refers to the fact that many encryption and encryption algorithms are used to ensure network security. This level of security makes it very difficult to forge base cryptocurrencies.
Many cryptocurrencies operate as a decentralized blockchain-based system without the need for a trusted third party such as a central bank or credit card company. In this type of peer-too-peer transactions, the public key and the private key are used to make the transactions easier.
Undoubtedly, Bitcoin is the most popular and widely used blockchain-based digital currency. And of course Bitcoin is also the most valuable currency code. Of course, although Bitcoin is the most popular currency code, it is not the only digital currency that exists. Other currencies (called Altcoins) such as LightQueen and Monroe are also considered digital currencies.
Due to the virtual nature of cryptocurrencies, there is no central repository or resource, which means that there is no backup, and if the user forgets his private key, his digital currency is virtually unusable and lost.
Unlike cash, which can be spent anonymously; Transactions with base cryptocurrencies, or digital currencies, although initially seemingly anonymous, are completely traceable in the Chinese blockchain. It is worth noting that some currencies such as ZCash, Dash, and Monroe are much harder to track than Bitcoin.
On the other hand, base cryptocurrencies or digital currencies are known for their innumerable price fluctuations because their value is determined solely by supply and demand.
In short, digital currencies are a general term for virtual currencies and cryptocurrencies because they are available online. Virtual currencies are a type of digital currency that exists in the virtual world. Examples of this type of currency are companies and online monopolies created by developers. Digital currencies (cryptocurrencies) are a type of digital currency because they are available online, although these types of currencies are created with cryptographic algorithms.
So while we may often use the terms digital currency, virtual currency, or currency code instead of each other, we need to be aware of their differences.
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