Virtual Currency: Top Details You Need to Know About Virtual Currencies | Beginner's Guide

Anisa Batabyal
| 07 February, 2020 | 2 min

What is Virtual currency?

Digital currencies are the forerunners nowadays, because of its incredible features. Virtual currencies are unregulated digital currencies that are available in electronic form only. It is stored and transacted through dedicated digital mobile or computer wallet applications, and the transactions happen over a secure dedicated network. Virtual currencies are considered a subset of the digital currency group. 

Virtual currencies can be seen as an electronic representation of monetary value which may be managed and controlled by developers, private issuers or the founding organization. This kind of virtual currencies can be represented in terms of tokens. Virtual currencies are not being issued by a bank or central authorities, as it relies on a system of trust. They derive their values on specific mechanisms like mining in the case of cryptocurrencies.

In 2012, the term “virtual currencies” came into existence when the European Central Bank defined virtual currency as a subset of “a digital currency in an unregulated environment, issued and controlled by its developers and used as a payment method among members of a specific virtual community” (History of Virtual Currency). Virtual currencies are mostly meant for peer-to-peer payments, which are strongly getting adopted for the purchase of goods and services. Example of Virtual Currency: any currency in the virtual world, eg: PayTM

Difference Between Digital, Virtual and Cryptocurrencies

Digital currency is the superset, which branches out to its subsets like Virtual currencies, whose subset is again cryptocurrencies. Digital currencies cover all the assets in digital form, which can be regulated or unregulated. When it’s regulated, it can be denominated by a sovereign currency, like fiat currency, which is the country’s currency. If it’s unregulated, then it has got no backing up. Example of Digital currency: coins used for online games like Farmville. Some of the countries using Digital currencies are Germany, Argentina, China, etc.

Virtual currencies has a subset called cryptocurrencies like Bitcoin and Ethereum which uses cryptography technology. Cryptocurrencies keep the transaction secure and authentic by helping to manage and control the creation of new currency units. Cryptocurrencies interact over blockchain-based decentralized networks that are transparent to the users. There are no restrictions on who can access cryptocurrencies.

Cryptocurrencies Examples: Bitcoin, Ethereum, etc

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