A virtual digital crypto-currency is a currency that is entirely digital and uses cryptography to secure transactions and control the creation of new units.
Unlike fiat currencies, which are printed on paper or minted in metal, this type of currency does not represent something physical such as gold or silver. (Fiat refers to money that has value only because of government regulation or the law.) Many consider it to be an alternative method of payment or exchange for goods and services.
Typically, brokers can convert virtual digital crypo-currency into traditional currencies, who then liquidate them into cash. They may also be directly traded with other individuals. These types of transactions usually take place via online exchanges where buyers and sellers interact directly.
Many virtual digital cryptocurrencies are decentralized, which means that no one entity controls them. Instead, the infrastructure is distributed across a network of computers worldwide so transactions can occur anonymously. Transactions with these currencies cannot be modified or reversed once they have begun. As soon as you make them, they’re finalized.
The most popular virtual digital crypto-currency today is bitcoin (BTC). Introduced in 2009 by Satoshi Nakomoto (thought not to be their real name), bitcoins only exist online and aren’t regulated by any country or banking authority. You can buy bitcoins on exchanges like Coinbase or Circle; most people purchase them through mining. However it’s acquired, BTC is used to make anonymous payments without being traced.
The value of BTC has risen over the years, with the price hitting its peak in 2013 with a single bitcoin worth more than $1,100. The cryptocurrency is now trading at around $340 per coin, with almost 12 million bitcoins currently in circulation globally.
Other digital currencies are available, and some are created for specific virtual worlds or communities, such as Second Life’s Linden Dollar (currency). Other popular cryptocurrencies include Litecoin, an open-source global payment network that uses blockchain technology; Peercoin is another one that uses proof-of-stake algorithms instead of proof-of-work to validate transactions; Nxt relies on proof-of-stake as well, allowing users to earn transaction fees; and Primecoin will enable miners to verify prime numbers while securing the network.
While some people may be wary of virtual digital currencies at first, it’s clear that many find them valuable and more people continue to adopt this payment method. These crypto-currencies can be used in more than a few ways, from online retail purchases to medical procedures performed on Second Life.