Digital Currency

Digital currencies, also known as e-money, are now more popular than ever. Until recently, digital currency lacked the security to eliminate the need for paper money. However, with the rise of the internet and the advent of blockchain technology, this is no longer the case. Today, digital money is set to change the market forever.

Importantly, digital currencies fill all the uses of traditional forms of money. You can purchase goods or pay for services via these technologically superior financial alternatives. Digital money provides users with instantaneous transactions and more transparency in the market. As such, more countries plan to unveil some form of digital currency in the next couple of years.

What Is Digital Currency?

Digital currency is a form of currency that is available only in digital or electronic form, and not in physical form. It is also called digital money, electronic money, electronic currency, or cyber cash.

History of Digital Currencies

An American computer scientist by the name of David Chaum is credited with developing the first concept for digital currencies way back in 1983. By 2990, Chaum created a working model of his theory dubbed – DigiCash. The concept was years ahead of its time. Consequently, it never gained the momentum needed to survive in the market.

The first recorded public use of digital currency in a wide-scale emerged in 1996. The currency, known as e-gold secured millions of active users before it was shut down by government officials in 2008. From that point, a myriad of corporate-sponsored digital currencies entered the market.

All of these digital currencies encountered a problem known as “double-spend.” Basically, developers struggled to develop ways to ensure that each digital currency could only be spent one time during transactions. This issue saw resolution with the introduction of the world’s first Cryptocurrency – Bitcoin.

How does the Digital Currency Work?

There are many different types of Digital Currency that could be found all around the world. The working of all these different currencies are basically almost the same. The most difficult part to understand in the working of digital currency is the blockchain network. The blockchain is a technology that is the foundation for all the digital currencies, but they are not bound to any single type of currency. Blockchain of digital money is a specific protocol that the digital currency follows. This protocol helps the creation and use of digital money. Some criteria are specified by the blockchain protocol that must be unique to every currency being produced. These criterions are as follows:

Unique and non-replicable
Limited in supply
Durable
Divisible
Uniform
Non- refundable.

Blockchain protocol is compulsory while developing a digital currency. Once the digital currency is created, it must be accessible to people for use. Here comes the concept of “mining”.

The digital currency’s network is a place where all sorts of transactions related to the currency have taken place. Any new transactions are divided into “blocks”. These blocks are confirmed by the miners and validated by multiple users throughout the network before they are added to the end of the chain. Once the block is confirmed, it is sealed and recorded on the public blockchain ledger.

After the digital currency is mined, or transferred between users, it must be stored in some place. That storage space is called the Digital currency Wallet. These are software that is capable to keep the digital currencies securely for an infinite period. The digital currencies are encrypted. So, they have a public key and at least one private key. Some digital wallets are secured using the feature of multi-signature.

The Future of Digital Currency

Given the current state of the world, digital currencies are set to explode in the coming year. Today, there is a robust digital infrastructure in place to support the mass adoption of these currencies. Additionally, their development is being catapulted into the spotlight thanks to the Coronavirus pandemic. You can expect to see this trend continue as more people across the world gain access to high-speed internet. For now, digital currencies such as Bitcoin continue to reshape the international communities’ definition of money.