Nov 29th, 2017, 10:57 AM

Cash, Card or Virtual Money?

By Anastasija Baiko
Image Credit: Flickr
Digital currencies are gradually emerging as a new, alternative payment method—but at what cost?

Digital currency—sometimes known as cryptocurrency— is rather self-explanatory: it is currency in virtual form. Similar to a bank card, one would assume, but no, this currency is without any physical form or value, existing only in an electronic form. Consider it akin to the "fake" digital currency used on gaming sites—but usable as actual currency. The most well-known digital currency is easily Bitcoin (BTC). However, it exists under multiple other frameworks such as Ethereum (ETH), Ubiq (UBQ), Blackcoin (BLK) and Litecoin (LTC). All of the currencies are decentralized, meaning that there is no third-party authority (read: bank) that control the activity of the transactions happening between individuals—these transactions are only known to the participants due to encryption of the transmitted data. Consider instantaneous transfers of ownership without borders worldwide performing the same activity physical currencies allow doing—the ability to purchase goods and services.

Image credit: Pixabay

Take Bitcoin as an example, a digital currency that has its own payment network also called Bitcoin. It follows the usual concepts of any other digital currency, a token that can be sent electronically from one user to another without the barriers of time and space. They can be bought locally through companies that will sell them to you in exchange for the local currency, like in the United States where a company called Coinbase links to your bank account to then sell you the coins for dollars. If one would like to be more anonymous without verifying their identity to Coinbase, they could use Local Bitcoin, which allows buying and selling the currency without any identity verification. Satoshi Nakamoto, who continues to be a mysterious personage, developed the currency in 2008. What makes him mysterious is that no one has ever laid eyes on him; Nakamoto's main source of communication was through email and social messaging. Therefore, when he disappeared two years later, he lost all control over the network. Now, anyone using it has just much control as the inventor himself, and as a result, no one has the authority to reveal users' identities.

Image credit: Financial Tribune

Investor and student Alec Schuman gives insight into his experience with digital currency, saying, “I have invested in cryptocurrencies such as Bitcoin and Ethereum for about a year now. It’s a way for people to control their own money. A cryptocurrency also is the first asset in history that cannot be taken by your government. If you are a refugee fleeing your country, you are able to carry your wealth with you on a USB. If you were Greece or Cyprus where the banks wouldn’t let people withdraw their own money, you would be able to. In Argentina and Venezuela, with hyperinflation of the currency, you would be safe. Cryptocurrencies are very risky and new, but in my opinion, can act as a digital gold.”


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Cryptocurrencies are an increasingly popular commodity, becoming well-known among large corporations in various sectors of business such as retail and food & beverage. However, that still does not come without some concerns in the marketplace between consumers and businesses. Digital currencies have a lot of advantages. They lower transaction costs and increase the ability to make payments globally at any moment in time that makes conducting business in foreign countries much easier. The activity is secured, clearing the way for payees and payers to be the only ones involved in it, eliminating third-parties processes and infrastructure costs as well as potentially eliminating any risks exposure of transactions could carry. However, that is exactly when some disadvantages come into context, primarily concerning information security. The acceptance of the currency is limited by its inherent risk, which reflects on the limited user base and bank acceptance, which does not allow companies investing in cryptocurrency to earn any interest. Perhaps it is the still-developing infrastructure of the currencies or the lack of development of tax laws or frameworks for cryptocurrencies, but cryptocurrencies still have a long way to go to gain consumers' trust.