Everything You Want To Know About Digital Currency And Cryptocurrency
While the cash and coins you may have in your wallet are a form of physical currency, advances in online technologies have allowed for a new type of currency, digital currency, which is purely digital. When you buy something online, you typically use digital currency in the form of an online wallet or a credit card. In addition to regular digital currency, however, cryptocurrency is also available. It's less common but growing in popularity. If you've heard about digital currency or cryptocurrency, and you want to learn more, check out these five questions.
How Does Digital Currency Have Value?
Put simply, digital currency is money that you can use to buy items and services or transfer to someone else online. It's commonly used in the form of credit cards, bank cards, online bank transfers, electronic wallets, online payment vendors, etc. The money, like the physical money used in the US, is considered a fiat currency, which means it isn't backed by a commodity. The reason the money holds value is because people agree it has value, usually the government. Therefore, as long as the government continues to support the type of digital currency you're using, such as a specific credit card or electronic wallet, the money has value.
How Does Cryptocurrency Differ From Digital Currency?
Cryptocurrency is actually a type of digital currency, but it differs slightly in that it isn't regulated. In other words, there is no one government, bank, credit card company, etc. who has created and distributed the money. Instead, the money is created and regulated by the community who uses the cryptocurrency. This regulation ensures the market doesn't get oversaturated with the cryptocurrency, making it useless. This is commonly done with an algorithm, which controls the supply. This type of currency is not usually considered legal tender by the government. Its value relies on the demand of the people using it.
What Are the Benefits of Using Cryptocurrency?
There are many benefits of using any digital currency because it allows you to send money to just about anywhere at a moment's notice. However, cryptocurrency has its own unique benefits, which is why it is growing in popularity among many investors. For starters, cryptocurrency usually has fewer fees because there is no third-party, such as a bank, involved. There may be fees for any online wallet you use to store your cryptocurrency. Cryptocurrency is great for international payments too because you don't have to worry about exchange rates, interest, transaction fees, etc. Another benefit is the security. Cryptocurrency is encrypted for protection, and because you don't have to use your credit card account or bank account number, there's less risk of someone stealing your identity.
Are There Any Risk With Cryptocurrency?
There are also a few risks when you invest in cryptocurrency, but the biggest is the volatility. The cryptocurrency market is still new, which means there are a lot of competitors trying to become the new currency. You may invest all your money in one type of currency because it's gaining popularity just to see it suddenly fall when a new cryptocurrency hits the market. In addition, cryptocurrency has a problem with liquidity risk, meaning you may not be able to sell fast enough to get a reasonable price.
Digital currency is already being used throughout the world to pay for various goods and services online. However, because of the many benefits, more and more people are choosing decentralized cryptocurrency instead. If you are interested in investing in various currencies, you should consider investing in cryptocurrency. For more information, locate a site where you can purchase cryptocurrency, for example buying Bitcoin with a Visa, today.