Digital currency or cryptocurrency

What is digital currency?

Head of content

Digital currency or cryptocurrency, which is also called cryptocurrency in its Persian equivalent, is actually a type of digital money that is used as a substitute for common currencies in the world. Digital currencies operate in a decentralized manner, on the basis of the blockchain network, and are designed using complex cryptographic protocols, which are not traceable and identifiable. Decentralized means that no entity, organization or government can control or monitor it. The purpose of creating cryptocurrencies was to increase security and prevent currency fraud, to facilitate money transfer.

Digital money has no external existence and is mined using advanced computing computers and moved on the blockchain platform. Digital currencies can be stored in the internal wallets of exchanges, software wallets, and hardware wallets, and can be moved anywhere in the world at any time and place, without limits in terms of amount. Even in some countries, there are ATMs where digital money can be changed to physical money or transferred to another wallet number.

Digital money has many differences with fiat, which is physical money, and improves the process of monetary transactions. For example, digital currency can make it easier and faster to transfer currency across borders than standard money.

Successful businessmen always use the latest methods of the day to develop their business. They know better than anyone what the consequences of a single day’s delay in payment can be. Falling behind competitors and the market can reduce their profitability to a great extent. Merchants and merchants can transfer their payments through digital currency, without restrictions and with very low fees, all over the world. But in the meantime, exchanges are needed to be able to convert their dollars or rials into the desired digital currency and make their payments. One of the special services of Qoqnous Trading is digital currency services and currency transfers. You, the businessmen, can pay your accounts using any digital currency, you can be in touch with the expert and professional advisors and experts of Qoqnous.

In the rest of the article, stay with Qoqnous Trading, to examine how the digital currency system works, its advantages and disadvantages

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How does the digital currency system work?

Bitcoin and other digital currencies were created while working on the digital money project. This project sought to create a method that would enable financial exchange and transaction in digital platforms, which was a centralized system. While Bitcoin and other types of digital currency emerged in a completely decentralized platform.

All transactions are done on the blockchain platform and the network in which cryptocurrencies are exchanged is like an accounting ledger. In this accounting book, all the transactions that take place are recorded in the network. In this case, it will not be possible to change the information registered in the system. Every new transaction that is going to be registered in the system must be approved by all users, who are known as nodes in the blockchain network and similar networks.

Digital currencies are generated through mining using advanced computers. In the mining of digital currency, there is something called hash, which is actually a mechanism that links each block of information in the blockchain network to its previous block.

Cryptocurrency miners work by generating each block and adding it to the blockchain. In order to be able to extract digital currencies, advanced computers are needed, which are referred to as miners. Cryptocurrency mining consumes a lot of electricity.

What problems does digital currency solve?

Currently, several systems perform their transactions with digital versions of money. For example, credit card systems allow their users to purchase goods and services on credit online.

Traditional transfer systems enable the movement of cash across borders. But they have high fees and are time consuming. Because they involve the use of different processing systems. All methods of currency transfers have limitations, delays in transfer and high fees. The digital currency system has solved this problem. Using digital currencies, it is possible to transfer an unlimited amount of digital money around the world in a fraction of a second, some of which have very low fees.

Types of digital currency

Digital currencies are divided into different categories, the most important of which are:

Cryptocurrencies

Many people think that cryptocurrency is the same as digital currency, while cryptocurrencies, which are a type of digital currency, are designed for receiving and making daily payments. For example, to pay for food in restaurants, hotel reservations, online purchases, etc., many digital currencies fall into this category. The lower the transaction fee, the more suitable the currency is for daily payments. Of course, you should also consider which currency the online store in question accepts payment with.

Stable coins

In order to validate digital currencies, a support has been placed for them. Their support can be fiat currency of a country such as dollar or even gold. Stablecoins are also known as stable digital currencies. Tether (USDT) is one of the stablecoins that is backed by the US dollar. Tether is the value of the US dollar and Tether can be used instead of transferring dollars. With the advantage that you will have unlimited transfer, in a short time and with a much lower fee.

Privacy Coin

This type of digital currency was created with the purpose of anonymity and the impossibility of tracking transactions. In other words, private transactions can be done using this type of digital currency. ZCash and Monero are two examples of privacy coins.

Cryptocurrencies of the service provider or Coin as a Service

Some cryptocurrencies that were created with specific goals such as solving society’s problems or simplifying a service can be placed in this category. For example, Ethereum was created with the aim of providing a suitable platform for smart contracts. A platform on which different projects can be implemented. Today, more than 90% of tokens operate on the Ethereum network.

utility or service tokens (Utility Token Or App Coin)

These tokens have been created for special purposes. For example, a developer may have designed a cryptocurrency to watch a particular team’s football. In this case, that token can only be used as a ticket to watch that team’s football. In other words, these tokens have value and validity only in the specified system. Filecoin and Sia tokens are two successful examples of utility tokens.

Securities currencies or security tokens (Security Token)

ICOs can be introduced as shares of companies. ICOs are actually the initial offering of digital currencies that are implemented on the blockchain network by various companies. For example, consider that a company wants to do a big project and has the ability to do it, but it doesn’t have the capital it needs. In this case, by estimating the required initial capital, the company prepares and supplies a number of tokens on the blockchain platform at a specific price, so that it can obtain the required capital by selling them. With the progress of the project, the value of the tokens has also increased and those who participated in the initial offering can earn a good profit by selling it.

Central Bank Digital Currencies (CBDC)

Central Bank Digital Currencies (CBDCs) are currencies issued by a country’s central bank. They are separate from fiat currencies. CBDCs facilitate the implementation of monetary policies by eliminating intermediaries and by establishing a direct connection between the government and ordinary citizens. Depending on their application and implementation in the economy, there can be two types of CBDC.

Retail CBDCs: Designed to be used for day-to-day transactions. Just like fiat currencies.

Wholesale CBDCs: Used for transactions between banks and financial institutions.

The most popular digital currencies

There are thousands of cryptocurrencies, most of which have little potential for growth in addition to their low value. It is impossible to know all these currencies, but in order to operate and understand the market, you must be familiar with the most important digital currencies. In the following, we have listed 10 popular cryptocurrencies according to statistics.

Bitcoin Bitcoin
Ethereum Ethereum
Tether Tether
Binance Coin BNB
Cardano
Solana Solana
Ripple XRP
Polkdot
Dogecoin
Shiba Inu Shiba Inu

Use of digital currencies

Digital currencies have many uses in today’s world, the most important of which are mentioned below.

Online shopping with digital currencies

The purpose of creating cryptocurrencies at first was to facilitate internet payments and these currencies were used in payments like physical money. Currently, many online sites, mobile applications, online shops as well as reputable stores have added the possibility of buying and selling online with digital currencies to their payment methods.

Trading internationally with digital currencies

One of the most important features of digital currencies is their international recognition in recent years. Since these currencies do not belong to specific countries and governments, they are recognized as an international currency and transactions can be made anywhere in the world and money transfers can be made using Digital currencies, done in a fraction of a second.

Carrying out heavy transactions using digital currencies

Digital currencies are not the same as physical money, they have no transfer restrictions, low fees and no taxes. Therefore, they are the best choice for high value transactions and heavy volumes. Digital currencies can be used for heavy transactions where the transfer fee is very high.

Investing in the digital currency market

Considering the uses and benefits of digital currency, many people are interested in investing in this market today, and the market cap and the value of currencies are increasing day by day. Therefore, it is possible to get a good profit in the medium and long term by smart investment on reliable and practical currencies.

Bypassing sanctions using digital currencies

One of the most important uses of digital currencies is to circumvent sanctions. Cryptocurrency networks are decentralized and do not follow the laws of any country. Therefore, they are not required to comply with economic sanctions imposed by governments. Although many payment methods such as Swift or PayPal are prohibited for some countries, no country has been banned for using cryptocurrencies.

Advantages of digital money

Among the most important advantages of digital currencies and cryptocurrencies, the following can be mentioned:

The main advantage of digital currency is that it increases transaction speed and reduces costs.
Digital currency reduces the costs of printing money or storing it in bank vaults.
Digital currency can revolutionize the remittance industry by eliminating intermediaries and reducing costs related to transfers.
Due to the use of very complex and advanced encryption, these types of transactions are highly secure and the possibility of fraud and repetition is very low.
Digital currency transactions are not taxed. For this reason, it is very economical for high volume transactions.
Due to the fact that the identity of the buyer and the seller is unclear, it is not possible to track the transactions.
It is possible to buy from international sites using digital currencies.

Disadvantages of digital money

Considering all the advantages that digital currencies have, they also have their own disadvantages, the most important of which are mentioned below:

Even though digital currency networks themselves cannot be hacked. But hardware and software wallets can be accessed and hacked.
The digital money system has its own costs. For example, a digital wallet or hardware is required to store digital money. Systems that use blockchain must also pay transaction fees or transaction processing fees to miners.
Digital currency has questioned banking policies around the world, so many governments are against it and have banned its use in their country.
If you forget your wallet password, it is impossible to recover it and you have practically lost your money.
In case of hacking or wrongly sending to another account, it is not possible to follow up and return.
The digital currency market has high fluctuations, if you are not familiar with its mechanism, you will suffer losses.

last word

Digital money is any payment that is purely electronic and has no physical existence. Despite the advancement of technology and blockchain platforms and networks, digital currencies can be used for various purposes. Digital currency simplifies and speeds up money transfer and remittance systems, has very low fees, and is tax-free.

Digital money is a major innovation in financial technology. It overcomes liquidity problems and makes payment systems faster and cheaper. But it leads to problems such as hacking. Dear businessmen and traders, you can contact Qoqnous experts for the transfer of digital currencies for any transaction.