What It Is

Digital Currency: A Comprehensive Guide

What It Is

Digital currency, also known as digital money or electronic currency, is any currency that exists solely in digital form and can be transferred electronically. Unlike physical currency, digital currency is not backed by a physical commodity such as gold or silver and its value is determined by the market.

How It Works

Digital currency relies on cryptography to secure and verify transactions. When a transaction is made, it is recorded on a distributed ledger, which is a shared and immutable record of all transactions. This ledger is maintained by a network of computers, making it extremely difficult to counterfeit or alter.

Types of Digital Currency

There are two main types of digital currency:

• Centralized digital currency: This type of currency is issued and controlled by a central authority, such as a government or a bank.
• Decentralized digital currency (cryptocurrency): This type of currency is not controlled by any central authority and instead relies on a peer-to-peer network to verify and record transactions.

Examples of Digital Currency

Some examples of digital currency include:

• Bitcoin
• Ethereum
• Litecoin
• Dogecoin
• Central bank digital currencies (CBDCs)