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.
Understanding Digital
Currency
Digital currencies are intangible and can only be owned and
transacted in by using computers or electronic wallets connected to the
Internet or the designated networks. In contrast, physical currencies, like
banknotes and minted coins, are tangible and transactions are possible only by
their holders who have their physical ownership.
Like any standard fiat currency, digital currencies can be
used to purchase goods as well as to pay for services, though they can also
find restricted use among certain online communities, like gaming sites,
gambling portals, or social networks.
Digital currencies have all intrinsic properties like
physical currency, and they allow for instantaneous transactions that can be
seamlessly executed for making payments across borders when connected to
supported devices and networks.
For instance, it is possible for an American to make payments
in digital currency to a distant counterparty residing in Singapore, provided
that they both are connected to the same network required for transacting in
the digital currency.
Digital currencies offer numerous advantages. As payments in
digital currencies are made directly between the transacting parties without
the need of any intermediaries, the transactions are usually instantaneous and
low-cost. This fares better compared to traditional payment methods that
involve banks or clearing houses. Digital currency-based electronic
transactions also bring in the necessary record keeping and transparency in
dealings.
How does Blockchain
Wallets work?
Cryptocurrency wallets reflect your account balance- your Bitcoins, your ICO tokens, and any other digital assets you own. These wallets for cryptocurrency work like a bank locker. We don’t share our locker with others and we keep our locker keys safe. We follow the same principles in crypto wallets. When you create a crypto wallet, a private key is generated. This should be safeguarded and not shared with untrusted entities. A public key is also generated. This has to be shared with people who wish to transfer your crypto. When a person sends you crypto, he will include the private key of his Bitcoins and the public key of your wallet. Thereafter transactions can be completed and new Bitcoins can reach your account.
When you spend some Bitcoins from your wallet, you are essentially signing off their ownership to the other person. For doing this, the private key of your Bitcoins must match the public address of the receiver. Then only, Bitcoins are transferred and your wallet balance reduces. The whole transaction is encrypted and added to the relevant blockchain and wallet balances of the two involved parties show changes.
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