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Virtual Currencies

Updated: Jun 9, 2022
Article Rated: 7.31
3.7 star rating (48 votes)
No doubt that everyone had heard about bitcoin and its extreme stock rise a couple of years ago. Wide spread of this information made a lot of people interested in the topic of virtual money and e-currencies. It caused a huge wave of enthusiasm about this market, and a lot of people decided to invest in, or at least stay in the field of virtual currencies.

Actually, scientists do predict that in the near future virtual currencies would be used a lot more, even for our everyday payments. So this is not a one-year trend that will disappear - even in 2020 e-currencies are doing stronger than ever before.

Among the reasons for the increasing popularity of electronic payments, we can surely highlight the speed, the accessibility and the safety. Unlike banks, electronic payment systems work constantly, in the automatic mode - they rarely run out. E-payment systems do not have holiday breaks or off-work days. In addition, the same money transfer can be carried out both inside the country, as well as beyond the borders, without having to adjust to different banking rules of the countries. Plus, electronic payment systems allow transferring one virtual currency to another without any problem. It happens instantly, with the help of many online services and online trading.

Also, digital money is specifically created in such a way that it can't be hacked. It is practically impossible to do it, since it has an encrypted digital format. All hackers can do is to find a password to your digital wallet. Other than that, your electronic transactions are 100% safe.

But the most surprising thing for many people that had just heard something about the internet currencies is that bitcoin is not a fact considered an e-currency. It is undoubtedly a cryptocurrency which is a part of virtual currencies. And virtual currency, cryptocurrency and e-currency cover different areas.

Though they all can be referred to under an umbrella term - digital currencies. Digital currency means that money is available exclusively in digital form and is not associated with any cash currency. Digital currencies are intangible and can be controlled by a computer or electronic wallet that is linked to specific networks.

Let's get deeper into it. This information is quite useful if you ever considered investing in this field.

What Are E-currencies?

E-currencies are a digital alternative to cash, which means that this money can be in cash or digital format without any additional conversion. Thus, there has to be an actual offline currency which is associated with a particular e-currence.

The European Central Bank defines electronic money as monetary value stored electronically and used on devices to make payments. Depending on the technology used to store this monetary value, the type of electronic money can be both hardware-based and software-based, for example, payment cards, virtual cards or payment accounts. Electronic money can only be issued by authorized institutions such as banks and electronic money institutions. A special license to issue electronic money is required.

E-currencies are in fact very widely used nowadays, by various banking services or even huge online markets. They are 100% secure and can't be faked.

What Are Virtual Currencies?

Virtual currency is an unregulated digital currency that only exists in virtual format. This electronic representation of monetary value can be used as a payment. Generally, you need a wallet, mobile or web application to perform it. Any natural or legal person can electronically transfer, store and trade virtual currency.
However, virtual currencies are not used as a store of value, unit of account, or value used to calculate an exchange.
It is important to understand the role of virtual currency. This type of currency does not replace the indicated currency and is not issued by the banking authorities.

This means that today virtual currency is an unregulated currency, but it is a matter of time. Some countries already make attempts to regulate the virtual currencies market. The legal regulations in this field are not automatically bad, in fact, they can help the popularisation of the virtual currencies and the spread of information to the general public.

Central banks and regulators are actively working to create new, regulated and officially released types of virtual currencies (such as cryptocurrencies, for instance). This is a long process because the Internet field is generally quite under-regulated. Plus, the anonymity tools makes it almost impossible to successfully implement the legislation in this sphere.

What Are Cryptocurrencies?

Cryptocurrency is an unregulated virtual currency that is created and protected from counterfeiting and tampering through cryptographic encryption. The cryptocurrency rate depends only on supply and demand in the market. That caused the famous rise and equally famous decline of bitcoin - which is though going up again now.

Cryptocurrency is also a type of digital currency, however, it is not a type of e-currencies because it is not regulated or issued by any bank or electronic money institution.

The number of cryptocurrencies existing in the financial market today is extremely large. For instance, besides Bitcoin, the most famous are: Ethereum, Litecoin, Zcash, Monero, etc.

Before investing in the cryptocurrency, it is crucial to evaluate the market tendencies and perspectives. It is not a very risky investment, but surely not an easy one, because you have to study a lot and to thoroughly monitor the cryptocurrency market.

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