Virtual money refers to the digital representation of money or value. It is controlled and regulated between the virtual community and the virtual currency developers. It does not have to be necessarily processed or issued by bank. Virtual currency, also known as, cryptocurrency or digital currency, is a digital or electronic currency that is not backed by the government currency.
Uses of Virtual Currencies
- Useful for online transactions but does not limit the user to just the online environment.
- Allows the user to buy real goods and services online.
- For instant payments anywhere around the world.
Examples of Virtual Currencies
Bitcoin is the trendsetter among the other virtual currencies in existence. It has been used widely as an enterprise solution. The main reason why it became so popular is because of its very low transaction fee – at less than a cent. Some companies and entrepreneurs, especially those who have employees working remotely, prefer to use this over Paypal or other online paying channels because it is low-cost, fast, and efficient.
- The Blockchain technology, pioneered by Bitcoin, is a system that allows for an efficient international financial integration.
- Virtual Currencies are the first global currencies that allow for instant processing of payments worldwide.
- No need to go through Government financial systems and banking networks.
- No intermediary required per transaction to avoid manipulation.
- The Blockchain technology is resistant to money laundering with its Anti-Money Laundering regulation.
- Decentralized. Independent of centralized financial policies.
- Lower transaction costs.
- Limitations on exchange because of different government tax regulations.
- There could be security risks because the system may be susceptible to hacking.
- Lacking outward exchange.
A new revolution in global currencies has been set by Bitcoin and other cryptocurrencies in existence as of this writing. The Virtual Currency market now has a total of 5.3 billion dollar market capitalization, which makes it very promising. However, analysts do not see this as an absolute replacement for the traditional payment methods in stores or other business environments. Some improvements with the Blockchain is recommended by experts because it still has lapses in security, regulation, and financial policies.