Digital Currencies – Introduction, Risks, Benefits and Much More
Achal Chaurasia– Digital Currencies
‘The future of money is digital currency’
These were the words stated by the epitome of global technological advancement, Mr. Bill Gates. The world revolves around the broad concept of getting transformed into ‘digital’. Starting from communication, media, and business to carrying on the economic activities, everything is now determined by a few clicks on your screen.
The economic and financial market has completely changed with the idea of Neo-banks, online banking, digital money transfer, etc. being introduced in the regular lives of people.
Cash payments are rapidly getting replaced by online payments now. People find it safer and more convenient to use online methods of dealing with making and collecting payments rather than using cash to do so which poses be complicated to some extent when it comes to keeping the right track.
Banks have started launching their personalized applications to encourage customers to use online methodology while dealing with money and processing almost all banking activities. Customers can now keep a track of all their transactions, additions, offers, bills, payments, etc. through their phones and laptops.
While all the activities that include money ( currencies ) are turning to be highly digital, why should money itself not get converted into screen form?
Well, our money is digital now. Currencies in the future are no longer seen to be in the form of paper notes or metallic coins but just a few numbers on virtual screens.
What are digital currencies?
Digital currencies are forms of money, currencies, or other money-like assets that are primarily stored, exchanged, and managed through digital computer systems.
A few types of digital currencies include- Cryptocurrencies, digital currencies, and central bank virtual currencies.
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Digital currencies can be easily used to buy products and services.
These currencies are believed to use a strong online ledger with solid cryptography to secure online transactions.
According to a market research website’s survey, more than 10,000 different forms of digital currencies are circulated in the market publicly. The approximate value of all such forms of currencies is estimated to be around $1.9 trillion as of August 2021 which is a little down from what it was in April 2021.
Why are digital currencies becoming popular? What are the benefits?
Supporters believe that using digital currencies will restrict the role of central banks and other middle parties from managing the supply of money. This will help in combating corruption and other related evil activities in the long run.
Decentralized tracking and recording systems are trusted to be far more secure and safe than traditional financial systems.
Supporters of digital currencies are rapidly expanding in numbers as they have started investing their trust in cryptocurrencies replacing traditional currencies in the future.
As per the observation of several economists, cryptocurrencies are believed to be a stable form of digital money and therefore, are safe to invest in.
Digital currencies are legal in many countries, including great economies like that of the United Nations, China, etc.
Assessing the precautions and risks related to digital currencies
Price fluctuation risks
The prices of digital currencies keep on fluctuating constantly, in such a case, keeping a correct track of the ups and downs becomes tedious. This creates confusion and complications at times.
Potential risks related to errors and hacking
As the system is all digital and maintained in an online mode, the risks of hacking and virtual errors are not negligible. Keeping security methods in such cases becomes crucial.
As the system is not centralized at any stage, the accountability rates are low. Therefore, trusting some form of authority with the answer ability in the case of highs and lows cannot be very much expected.
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At the end
All systems seek changes and transformations with changing times, this enhances the working mechanisms considerably as per the needs and requirements of the hour. Accepting and moving in favor of such changes after examining the benefits and risks is viable. Digital currencies are considered to be rays of sunshine for the upcoming scenarios of the economic market and we should try making them a much greater success by supporting their circulation in the long run.
A young businessman who has been in the line of entrepreneurship for quite a few years. He is an active learner and loves to know more about new technological developments coming up as well as how they can be put to great use to yield better results for society.