What are digital currencies? 3 Popular Types Explained

Definition: What Are Digital Currencies?

What are digital currencies?- Digital currencies have the potential to change the future of our money. Digital currencies are electronic currencies, that can be exchanged between two users over the internet and that can be accessed with a computer system or with a mobile. The question of what are digital currencies is one of the forms of digital payments (digital money), electronic currencies or virtual currencies.

How Does Digital Currency Work?

Digital currencies are available only in digital form. They don’t have any kind of physical existence so that we can touch and feel them.

All crypto is a digital currency but not all digital currencies are cryptocurrencies.

Digital or virtual currencies don’t require an intermediary so it is the best and cheapest method of virtual trading.

There is not any capping limit for transferring digital currencies as their transaction cost is very less compared to physical exchange.

The market of digital currencies is volatile. The prices of digital currencies go up and down according to the market situation.

What Are Digital Currencies? Exploring Crypto

The exchange of digital currencies can be done through different exchangers, also called an electronic crypto wallets.

The transaction of digital currencies is made using a computer or a mobile with a good internet connection. We can easily transfer this cryptocurrency to people around the world. We do not need any kind of physical presence for exchanging these types of currencies.

We can easily transfer digital currency within a minute to any person around the world with the help of blockchain technology and it is a secure method of virtual transactions.

Related article: Top 5 reasons why crypto is crashing again?

Digital Currencies: Types And Features:

What are digital currencies? Digital currencies can be described as different types of currencies that are to be used in the circulation of development. These digital currencies are divided into 3 types.

Central Bank Digital Currencies:

Central banking digital currencies are considered digital currencies. These currencies are issued by the governments of countries to regulate money circulation as well as the economic growth of the country.

These currencies are known as Central Banking Digital Currencies. Few countries have started to accept payments from other countries by understanding the concept of CBDC. Most countries are studying the impact of CBDC on the economy but have not implemented it yet.

What are digital currencies
Digital Currency

Crypto currencies:

These types of digital currencies are developed by private organisations to work independently without any involvement from the Government banking sectors. Cryptocurrencies work on the principle of Blockchain technology in which the information of every transaction is to be stored in the form of blocks to make it safer and secure.

The growth of Bitcoin, Ethereum, and many other digital currencies has changed the future of money and that exists only in digital form. These are untouchable and invisible forms of currencies still most people are used to them.


Stablecoins Or Virtual Currency:

Stablecoins are the type of cryptocurrency. It works on blockchain technology and cryptography technology. The stablecoins are the assets like; the US dollar and Gold. The stablecoin is a non-fluctuating asset like cryptocurrencies.

Related article: Top 10 crypto research tools

What Is Crypto Tax?

The tax format for crypto is different from any other assets. According to the new tax rules of the crypto market, every individual has to pay a flat 30% of tax on income(profit) earned from the transactions of the cryptocurrencies, NFTs and all other digital assets.

What Are The Best Digital Currencies To Buy?

Here are 5 of the best cryptocurrencies that you can buy. It is the best time to buy because the prices of cryptocurrencies are down.

Bitcoin is consistently growing in the digital market capitalisation. Other digital currencies like; as Ethereum is also growing to capture the market share. Ethereum works on Decentralised Finance (DeFi) system.

Some other coins are also having the potential to handle more transactions in the digital market. So we can buy such crypto those are having more transactions with a consistent growth ratio.

The 5 best Cryptocurrencies are: Bitcoin, Ethereum, Altcoin, Solana and Binance Coin(BNB)

Digital Currency: Advantages

Digital currencies are becoming more popular and accepted by people around the world. It’s because of the advantages of digital currencies.

24/7 Access:

Being part of the digital world, it has 24/7 access to make transactions with the same speed around the world.

In a traditional money transaction system, working days are fixed and we can’t transfer or receive money on non-working days so there are limitations in traditional banking system.

The traditional banking transaction takes too much time. The process gets slowed down because of various formalities of the bank.

Quick Payments:

It is a faster way of making digital transactions. Digital currency works on Blockchain technology and it takes less time to complete the transaction with total security.

Less Transaction Fees:

It charges a very less (negligible) amount for every transaction. Even we can move funds to make international transactions at a very low cost. This is the most important feature that makes digital currencies popular.

Digital Currency: Disadvantages

Difficult To Use:

Operating and transferring digital currency is a difficult task for a new person. Users must be familiar with basic tasks like; what are digital wallets (Binance, MetaMask etc) to know where to store digital assets properly and how to operate the account. To understand these fundamentals the system needs to be simple for everyone.

Difficult To Select Appropriate Currency:

Too many options for digital currencies are available in the digital market. These digital assets are having their own limitations and that gets difficult to understand.

The best currencies which can give you the best results are difficult to search. It can be possible only after learning the basics deeply.

Volatility Of Crypto Market:

Cryptocurrency prices and their value change at any moment so it is difficult to predict the future of our investment. We need to study the up and downs of the crypto market to understand the volatility of the market.

Digital currencies like Bitcoin and Ethereum are Fungible tokens. It means every Bitcoin is similar to another bitcoin. Cryptocurrencies like Bitcoins are not like Non-Fungible Tokens (NFT), which means all the bitcoins and their values are the same as any other bitcoin. So, no need to prove the ownership or authenticity of a cryptocurrency like: NFT arts, NFT music.


Q. How many types of cryptocurrencies are there?

Ans: Cryptocurrencies can be categorised into 4 different types based on their usage. The categories are DeFi, NFT, Utility tokens and Stablecoins.

Q. How many digital currencies are there?

Currently, more than 12000 cryptocurrencies are available in the digital market. The market is adding new coins every month.

Q. What is the difference between digital currency and cryptocurrency?

Digital currency is the currency available in digital form that has no physical presence and exists online only. Cryptocurrencies are stored in Crypto wallets. Cryptocurrency works on Blockchain technology.





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