What Is Digital Currency

Digital currency is any currency that’s available exclusively in electronic form. Electronic versions of currency already predominate most countries’ financial systems. In the U.S., for instance, the physical U.S. currency in circulation is only about one-tenth of the overall money supply; the remainder is held in various bank deposits in electronic form. 

 What differentiates digital currency from the electronic currency currently in most Americans’ bank accounts is that it never takes physical form. Right now, you could go to an ATM and turn an electronic record of your currency holdings into physical dollars. Digital currency, however, never takes physical form. It alw

ays remains on a computer network and is exchanged via electronic means. 

 For example, instead of using physical dollar bills, you’d make purchases by transferring electronic money to retailers using your mobile device. Functionally, this may be no different than how you currently treat your money using payment apps like Venmo, Paypal or Apple Pay. 


Following the successful launch of decentralized cryptocurrencies like Bitcoin and Ethereum, which store value but are not managed by any central authorities, governments and central banks around the world are researching the possibility of creating their own digital currencies, commonly known as CBDC. 

 Electronic cash does not have physical attributes and are available only in digital form. Transactions involving them are made using computers or electronic wallets connected to the internet or designated networks. In contrast, physical currencies, such as banknotes and minted coins, are tangible, meaning they have definite physical attributes and characteristics. Transactions involving these are made possible only when their holders have physical possession of these currencies. 

 Digital currencies have utility similar to that of physical currencies. They can be used to purchase goods and pay for services. They can also find restricted use among certain online communities, such as gaming sites, gambling portals, or social networks. 

 These also enable instant transactions that can be seamlessly executed across borders. For instance, it is possible for a person located in the United States to make payments electronically to a counterparty residing in Singapore, provided they are both connected to the same network. 


For two decades, this paradigm was a largely fringe concept championed by cryptography advocates before the launch of the cryptocurrency Bitcoin (BTC) in 2008, which heralded a new technological and social phenomenon.  

 While the goal of cryptocurrencies is to provide a medium for global, peer-to-peer transaction settlement that preserves privacy and financial security, these currencies more broadly encompass any electronic form of money, including the more recent trend of CBDCs.  

 Currently in development in China and other countries, these electronic currencies may leverage blockchain technology for secure payments but with added capital controls and surveillance practices in stark contrast with the ethos of cryptocurrencies.  

Different types: 

Digital Currencies: Regulated or unregulated currency that is available only in digital or electronic form. 

Virtual Currencies: An unregulated electronic currency that is controlled by its developer(s), its founding organization, or its defined network protocol. 

Cryptocurrencies: A virtual currency that uses cryptography to secure and verify transactions as well as to manage and control the creation of new currency units. 

Final Thoughts 

It is inevitable that something of this nature to arise and eventually takeover. It happened with salt, silver, then gold to what we currently use…paper money. Once it becomes universal then we would be able to accept it and adapt it to our everyday life