IT IN SOCIETY

Digital Currency:
Digital currency is a form of currency that is available only in digital or electronic form. It is also
called digital money, electronic money, electronic currency, or cyber-cash. Using digital
currency means the currency is exchanged digitally using the computers rather than exchanging
physical bank notes and coins. The most popular are payments using credit cards, mobile phones
and smart watches.
Types of digital currencies include cryptocurrency, virtual currency and central bank digital
currency. Digital money can either be centralized, where there is a central point of control over
the money supply (for instance, a bank), or decentralized, where the control over the money
supply is predetermined or agreed upon democratically.

Characteristics of Digital Currencies

 Digital currencies only exist in digital form. They do not have a physical equivalent.
 Digital currencies can be centralized or decentralized. Fiat currency, which exists in
physical form, is a centralized system of production and distribution by a central bank
and government agencies. Prominent cryptocurrencies, such as Bitcoin and Ethereal, are
examples of decentralized digital currency systems.
 Digital currencies can transfer value. For example, a gaming network token can extend
the life of a player or provide them with extra superpowers. This is not a purchase or sale
transaction but, instead, represents a transfer of value.
Types of Digital Currencies
1.Virtual Currency
A virtual currency is a digital representation of value only available in electronic form. It is
stored and transacted through designated software, mobile, or computer applications.
Transactions involving virtual currencies occur through secure, dedicated networks or over the
Internet. They are issued by private parties or groups of developers and are mostly unregulated.
Virtual currencies increase transaction speeds by removing intermediaries from the process, but
they are also susceptible to hacks and online scams. An example of a virtual current would be
tokens that can be collected or bought, for example, within a computer fame, that allow players
to buy different items within a game such as new clothing or amour.

Advantages of Virtual Currencies

1. Virtual currencies do not have expensive manufacturing and physical storage costs.
2. virtual currencies increase transaction speeds and eliminate geographical
boundaries.
3. It eliminates intermediaries during monetary transactions and establish a direct
connection between two transacting parties. Virtual currencies can be programmed to
complete automated transactions.
4. It can personalize a game or application by making it fun to collect and spend the specific
virtual currency.
Disadvantages of Virtual Currencies
1. Virtual currencies are attractive targets for hackers. There have been several cases of
hacking block chain networks for cryptocurrencies, a form of virtual currency.
2. Though they do not have manufacturing or physical storage costs, virtual currencies have
other associated expenses.
3. For example, cryptocurrency users are required to store them in digital wallets. At
trading exchanges, cryptocurrencies also have custody costs.
4. Virtual currencies can be subject to scams.
5. Unregulated virtual currencies do not offer legal recourses to investors because they are
issued by private entities and, for the most part, not regulated are by financial authorities.
6. Virtual currencies traded on exchanges, such as cryptocurrencies, can be subject to highly
volatile price swings.

Central Bank Digital Currency (CBDC)

The term central bank digital currency (CBDC) refers to the virtual form of a fiat currency. A
CBDC is an electronic record or digital token of a country's official currency. As such, it is
issued and regulated by the nation's monetary authority or central bank. CBDCs are meant to
represent fiat currency. The goal is to provide users with convenience and security of digital as
well as the regulated, reserve-backed circulation of the traditional banking system.

Advantages of CBDC
1. Simplifies the implementation of monetary policy and government functions.
2. Eliminates third-party risk.
3. Calibrates privacy features.
4. Allows the inclusion of the unbanked.
5. Prevents illicit activities such as money laundering and tax evasion.

Disadvantages of CBDC
1. Doesn't solve the problem of centralization.
2. Users may have to give up some degree of privacy.
3. Legal and regulatory issues are black hole.
Cryptocurrency
A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it
nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized
networks based on block chain technology—a distributed ledger enforced by a disparate network
of computers. A defining feature of cryptocurrencies is that they are generally not issued by any
central authority, rendering them theoretically immune to government interference or
manipulation.

Types of Cryptocurrency
The first block chain-based cryptocurrency was Bitcoin, which still remains the most popular and
most valuable. Today, there are thousands of alternate cryptocurrencies with various functions
and specifications. Some of these are clones or forks of Bitcoin, while others are new currencies
that were built from scratch.

Advantages of Cryptocurrency
1. Cryptocurrencies hold the promise of making it easier to transfer funds directly between
two parties, without the need for a trusted third party like a bank or credit card company.
2. In modern cryptocurrency systems, a user’s “wallet,” or account address, has a public
key, while the private key is known only to the owner and is used to sign transactions.
3. Fund transfers are completed with minimal processing fees, allowing users to avoid the
steep fees charged by banks and financial institutions for wire transfers. Immediate
settlement and international Transactions.
4. Potential for high returns.
5. It is difficult to counterfeit.

Disadvantages of Cryptocurrency
1. The semi-anonymous nature of cryptocurrency transactions makes them well-suited for a
host of illegal activities, such as money laundering and tax evasion.
2. High volatility and potential for large losses.
3. Unregulated and unbacked, Cyber hacking.
4. Difference between Digital, Virtual and Cryptocurrency
To summarize, digital currency is the blanket term used to refer to money that exists solely in
the digital space. Virtual currencies and cryptocurrencies are digital currencies because they exist
online. Virtual currencies are a form of digital currency available in the virtual world (think of
exclusive online communities created by developers). Cryptocurrencies are digital currencies
because they exist online, but they are also virtual currencies created with cryptographic
algorithms.