Digital Currency: What is digital currency? How is it different from Bitcoin and other cryptocurrencies?

 




Webmultichannel: Digital Currency is a form of currency that is only available in digital or electronic form. It is also called digital money, electronic money, electronic currency or cybercash. Digital currencies are currencies that are only accessible through computers or mobile phones. Because they exist only in electronic form.

Ordinary digital currencies do not require intermediaries and are often the cheapest way to trade currencies. All cryptocurrencies are digital currencies, but not all digital currencies are cryptocurrencies.


Some of the advantages of digital currencies are that they enable seamless transfer of value. Can reduce transaction costs. Some of the disadvantages of digital currencies are that they can be volatile and hacked.

Understanding Digital Currency Understanding Digital Currency

Digital Currency does not have physical features and is only available in digital form.

Transactions involving digital currency are performed using computers or electronic wallets connected to the Internet or designated networks.

In contrast, physical coins, such as banknotes and minted coins, are real, meaning they have specific physical features and characteristics.

Transactions involving such currencies are possible only when their holders have physical possession of these currencies.

The digital currency has the same usefulness as physical currency.

These can be used to purchase goods and pay for services.

They may also find limited use within certain online communities, such as gaming sites, gambling portals, or social networks.

Digital currencies also enable instant transactions that can be executed seamlessly across borders.

For example, a person based in the United States can digitally pay a counterparty living in Singapore, if they are both connected to the same network.

What is Digital Currency or CBDC?

The Reserve Bank of India (RBI) defines the Central Bank Digital Currency (CBDC) as a legal tender issued by the Central Bank in a digital form.

Simply put, it is a digital version of the Fiat currency, the Indian currency.

It is exchangeable with Fiat currency.

CBDC will bring with it all the benefits that we see with cryptocurrency as well as digital payment methods.

A digital coin can never be torn, burned, or physically damaged.

They cannot be lost physically.

The lifeline of a digital form of currency will thus be indeterminate compared to notes.

Digital Rupee different from Bitcoin

It was not known before how India's own virtual currency would be developed. The new budget sheds some light on the same issue, ensuring the use of blockchain and other technologies for its use in the country.

Blockchain technology is naturally decentralized. Which means all of its information is stored on a network of computers. This increases the resilience of the data against errors as well as cyber threats. For cryptocurrencies like Bitcoin, the developers of this network are spread across systems worldwide.


The digital rupee will have a slightly different version. Since the currency will be regulated by the RBI, it will not be decentralized in the real sense. This means that, in fact, an entity is controlling its issue and distribution, decentralization means the exact opposite.

The adjective "decentralized" is thus, in the case of the digital rupee, true for blockchain technology and its computer network. The RBI will have to set up the network in the near future, but the blockchain network will be limited to banks and related agencies.


The CBDC may require "an underlying system for issuing and distributing to the public" and for this, the RBI may need to include public and private banks, payment service providers (PSPs), and network operators.


A larger ecosystem would then include the involvement of other financial institutions and third-party service providers. So, although the digital rupee will follow the model of issuing physical currency, a setup is needed.


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