Virtual currency is a way to convert money into a non-physical object that has value. That’s it. It doesn’t have to be a token of gold or silver or another precious metal. It can be tickets to an event, the right to claim part of someone else’s property, even virtual currency itself.
In the simplest terms, virtual currency is money that exists only on computer servers.
There are two common kinds of virtual money: fiat and commodity. Fiat currencies can be created by any government and backed by law. Paper dollars and euro notes are examples. Commodity currencies also exist in paper form, but they are not created or backed by governments or other organizations. Bitcoins are one example of a commodity currency; gold coins are another example.
Virtual currencies don’t really exist in physical form, so there is no opportunity for double spending, which means that you can’t steal someone else’s virtual money without their permission.*
Virtual currency is an alternative to using traditional money. It’s a kind of digital money (it’s not really “digital” but it’s a way of moving money without using banks) that looks like regular money on the outside, but it has its own network of rules and its own value.
Virtual currency is something we’re just starting to see. It’s like a new kind of coin or note, with its own particular value, that you can use to buy things online. So far the main examples are Bitcoin and Dogecoin.
Virtual Currency is a lot of different things: credit cards, gift cards, loyalty points, money orders, airline miles, and so on. But most people think of it in one way: as an online equivalent of cash.
In this sense, virtual currency is like paper currency you can use to buy things. You can’t spend it directly at a store, but you can use it to pay for something that will be delivered as soon as possible.
In this sense, virtual currency is like “paper” money. In fact, virtual currency functions almost exactly like paper money (except that it is faster, cheaper and easier to use).
These are the main differences between virtual currencies and traditional currencies: 1) Virtual currencies have a centralized issuer: they are issued by companies and governments; 2) Virtual currencies are “tokenized” rather than physical money (you don’t need to hold them in your wallet); 3) Virtual currencies are not backed by any real asset; 4) The value of virtual currencies is not tied to any physical property or commodity; 5) They can be transferred instantly anywhere in the world where there are computers.
Virtual currency is a form of money that exists only in cyberspace. It doesn’t exist in physical form; for all practical purposes, it is not money at all.
It has been called “the new gold.” The idea is that people who can create virtual currency on their computers could move wealth around without moving the actual gold or dollars or pounds. This would make it easy to participate in from-scratch business models and disruptive technologies without any risk of having to move real wealth.
The idea sounds good, but there are two big problems with it. The first is that as far as we know, no one knows how to create virtual currency on a computer. As far as we know, you can’t do it at all.
Virtual currency is anything that exists only in computer memory.
Paper money has value because people believe it is valuable. If you print up a trillion dollars’ worth of dollar bills and put them in a warehouse in Arlington, Virginia, and nobody ever looks at them, they will have no value. It doesn’t matter that the U.S. government says they are worth one dollar.
But what if something is valuable not because it is real, but because the people who use it believe it is real? That’s virtual currency.
Virtual currencies are what the web was built on: they’re digital tokens, created by computers and then passed from user to user. There’s no central bank controlling them: no central clearinghouse behind it all. They live in computer memory, not physical space.
You can think of virtual currencies as advanced barter systems that allow you to buy things without ever exchanging anything for money or cash.
Virtual currency is the idea that money can be represented digitally. A digital currency is money that exists only in cyberspace. Virtual currencies are a way of creating money without printing it.
Virtual currencies take the form of “cryptocurrencies.” They are created by people who believe they can make more money than they would if they just used regular money. (Don’t ask me why.) The most famous cryptocurrency is bitcoin, which was launched in 2009. It involves a complicated system of computer code that makes bitcoins seem to exist even though there is no government-sanctioned currency and no central bank that issues bitcoins and controls their supply.
Not long after bitcoin first came out, the online bitcoin exchange Mt. Gox got into trouble; hackers stole nearly a hundred million dollars’ worth of bitcoins from its customers’ accounts. Bitcoin has been gradually gaining in popularity ever since, but it remains subject to hacks, and it has its own weaknesses–such as the fact that transactions are irreversible, so if you lose your laptop or get hit with ransomware you won’t be able to get your bitcoins back even if you find it again.
To understand this, let’s briefly recap the history of money. We’ve been using coins for about 3,000 years. Before that we barter, or use some form of direct exchange. Coins came into use when governments realized that coins were a lot easier to carry around than bags of gold (or silver). They also made it easier for governments to levy taxes, and thus build empires and expand their control over people.
Money has one further useful role: when you use it to buy or trade goods, it makes it easier for other people to trade with you. The more widely accepted the currency is, the more goods you can buy with it. So in practice the best way to make sure everyone knows you are a big shot is to print lots of money and make sure everyone knows you have tons of money. That’s why there are so many millionaires in China, which has no real economy but which prints money like crazy and lets people know through government propaganda who is important.