Introducing the types of digital currencies with their advantages and disadvantages

 Today we are witnessing the widespread use of digital currencies, and with the growth of the digital economy, the use and application of digital currencies is also increasing. The purpose of the introduction of these currencies is to abandon the traditional financial and banking systems and gradually replace them with physical currencies or paper currencies. In this article, we will introduce you to the types of digital currencies in the world, so stay tuned with us until the end of this article 


?What are digital currencies

But first of all, if we want to have a simple and clear definition of digital currencies, I must say that digital currencies are a new type of money that, unlike fiat currencies, has no physical appearance or form, and if you want to buy and sell digital currencies or To exchange them, you need to use networks of cryptocurrency exchange platforms and companies, and use digital wallets in order to store your cryptocurrencies in them. The best cryptocurrency trading platforms in Egypt 

Cryptocurrency history

The original history of cryptocurrencies goes back to the 1980s when they were called cryptocurrencies. But the official start of these currencies was in 2008 with the entry of Bitcoin, which was created by an unknown programmer or a group of programmers called Satoshi Nakamoto.

Since the emergence and launch of the first and largest digital currency in the world, which is Bitcoin, which occurred in 2009, and after that the number of these digital currencies increased every day, and the number of fans and those interested in this field and investing in these digital currencies has also increased abnormally.

Advantages of Cryptocurrencies

1- Ease of use and access

This means that anyone from all over the world can access and use digital currencies.

2- speed

Since the process of making and confirming transactions in digital currencies is done through the new Blockchain technology, and there is no third party involved in it, this process takes place at a very high speed, which is a great strength for fast international payments.

3- High protection

Digital currency transactions are made using Blockchain technology, and given that the Blockchain network consists of thousands of nodes or nodes, this significantly reduces the possibility of penetration of the network and increases its security. 10 countries, including Arab countries, where cryptocurrency trading is prohibited

4- Privacy

Another strength of digital currencies is that no one has access to your digital assets, and by having the password for your user account, you can have complete control over your coins.

Disadvantages of digital currencies

Disadvantages of cryptocurrency

1- Loss of capital in case of losing the password

As much as a password or private keys is a great feature for users and keeps their accounts secure, it is also important to keep them because if you lose these keys, you will no longer be able to access your account and your belongings. Nor will it be, in other words, your possessions will be completely destroyed. And don't forget that private keys can't be retrieved in any way.

2- The possibility of cryptocurrency theft

Given the nature of cryptocurrencies and the fact that no one but you controls your coins, it could pave the way for many hackers and crypto thieves to steal your assets.

3- currency volatility

Despite all the features and positive points that digital currencies exist, since these currencies are not fully used by the general public, and if the digital currency loses its validity for any reason, it will have practically no use for its owners. How to buy and sell digital currencies? Cryptocurrency trading

The word digital currency is actually a term used for all types of electronic money or electronic currencies. In general, there are three types of digital currencies in the world, namely cryptocurrency or cryptocurrency, virtual currency and central bank digital currency. In the following, we will explain these three types of digital currencies.

Types of cryptocurrency

Cryptocurrency is a type of digital currency that is created from the two words crypto and currency. You must have heard of the name cryptocurrency. Yes, this word is created from a combination of these two words. Cryptocurrencies use highly complex codes to make transferring money between people as secure as possible because it prevents fraud or respends. In other words, cryptocurrencies are used to create, store, secure and verify transactions on a particular network. Bitcoin and Ethereum are clear examples of cryptocurrencies.

Many of these cryptocurrencies belong to the group of virtual currencies and the reason is that there are no special rules and regulations for the use of this type of currency in many countries of the world.

virtual currency

Virtual currencies are those digital currencies that are not regulated. This means that not only is there no government or organization that has a role in legislating these currencies, but the digital currencies are controlled and managed by their own development team. Virtual currencies can also be mathematically controlled by a specific network protocol.

For example, Clash of Clans gems are a kind of virtual currency that is selected and controlled by the developers of the project.

Central Bank Digital Currency ( CBDC )

Central Bank Digital Currency, also called CBDC, is the short form of the English term "Central Bank Digital Currency". CBCDs are another type and are actually a new type of digital currency, the main purpose of which is to create a new evolution in the traditional and legacy payment systems.

In simpler words, the central bank digital currency, as its name suggests, was created by the central bank of countries and has the value of the country's paper currency. These types of currencies are mainly monitored and controlled by the government or regulatory body of the respective country and for this reason, it can be said that access to customer accounts is also available in this system.

With the spread of new blockchain technology, its application and use in various industries, many countries are trying to adapt and modernize their systems with this technology.

Currently, in addition to the countries that have launched their own national digital currency, there are many countries in the world that are at the stage of research and investigation on this topic, so that by fulfilling the necessary conditions and infrastructure, they can create their own homeland. Digital currency and its operation It should be noted that Venezuela is the first country to launch its own digital currency despite being subjected to political sanctions. However, contrary to expectations, this national digital currency is not well received in this country and is not widely used in Venezuela.

What is Bitcoin? An explanation for beginners with its advantages and disadvantages

Among these three main groups of types of digital currencies, the first category, i.e. cryptocurrencies, has a wider scope and application and is divided into broader types. Below, we have briefly introduced and explained the types of cryptocurrencies:

Types of cryptocurrency 

Paid Cryptocurrencies

Payment currencies, as the name implies, are those currencies used for payment. For example, you can use these types of cryptocurrencies to buy and sell goods, provide services, pay bills, etc.

5 most famous digital currencies in the world

In other words, the payment currency platform refers to the platforms whose main purpose is to conduct transactions in a decentralized and online manner, and thanks to the use of these platforms, the need for other intermediaries has been eliminated, and for this reason, the cost of conducting transactions is significantly reduced.

Cryptocurrencies such as Bitcoin, Litecoin, Ripple and Stellar are among the well-known and popular payment currencies in the cryptocurrency market.

And each of these currencies, which has its own strengths, is used in different payments.

Infrastructure Cryptocurrency

According to their performance, blockchain platforms have more duties than confirming and executing transactions and payments. These platforms allow developers to create their own tokens, Dapps, and such things on the platform.

On the other hand, infrastructure cryptocurrencies are usually used to pay for computers responsible for running various programs on the Blockchain.


You will learn more about infrastructure currencies with a simple example. The second largest digital currency in the world, which everyone knows as Ethereum, is actually called “Tether” and those who want to use decentralized software that runs on the Ethereum blockchain or implement their own decentralized program must have this digital currency.

In addition to Ethereum, there are other popular blockchains, each with its own application and use, and in order to use it, you need to purchase an infrastructure-specific digital currency. For example, the Cardano token is called Ada, which is used in the Cardano blockchain. Or the Dot cryptocurrency, which must be used to use the Polkadot blockchain .

Ethereum, IAS, Tron, and Solana are among the most popular cryptocurrencies.

Other cryptocurrencies such as Algorand, EOS, Tron, and Waves are other well-known examples of infrastructure cryptocurrencies.

privacy zeros

The third category of cryptocurrencies, as the name suggests, focuses on protecting users' privacy. These cryptocurrencies, also known as privacy coins, enhance privacy and anonymize blockchain transactions by masking the origin and destination.


In other words, unlike other currencies, in private crypto transactions, only the sender and receiver have access to the transaction information, and this information will not be publicly available on the blockchain.


Prius coins fall into two main categories. A group that maintains privacy by default and does not display user information, such as Monro and other groups that have provided their users with the ability to hide or disclose their information by choice. Zcash falls into the second category .


stablecoins

Stable coins, also known as stablecoins, are designed to deal with the inherent fluctuations in the price of digital currencies. This category of cryptocurrency has a fixed price and value, unlike other digital currencies that fluctuate a lot in terms of price, and for this reason, it is especially popular among traders.

Basically, stablecoins are not created by a specific person or people and are not controlled and managed, but a large corporation is responsible for supporting and building them.

The truth is that many people prefer to use stablecoins with a fixed value. This is why it can be said that currencies with stable prices will spread widely .

In fact, this is the same gap that currently exists between the traditional system of physical currencies and digital currencies. For this reason, one of the goals of creating and issuing stablecoins was to bring a level of stability in the cryptocurrency market and allow people to use their tokens for daily payments without worry. Stablecoins are trying to become a bridge between physical currencies and digital currencies.

Cryptocurrencies such as Tether, Pex, and Dai are among the most popular stablecoins in the market.

Memecoins

“Memecoins” are a group of digital currencies inspired by memes or jokes on the Internet and social media. Dogcoin was the first meme on the market, which dates back to 2013 and was inspired by a Japanese dog breed called the Shiba Inu.

The meme, which was not a reliable cryptocurrency at first and not many people paid special attention to it, has gone through so many volatility that over time it has found its fans, and now they basically have their own communities, which mostly because of the excitement in their communities, they are seeing a sharp growth or a drop in prices.

Dogecoin, Shiba Inu, and Baby Dog are among the most important and popular types of meme currencies.

finncial cryptocurrency

Other examples of cryptocurrencies include financial digital currencies. Currencies that are mostly used for things like lowering fees in exchange, borrowing and lending.


Among the other applications of financial digital currencies is the management and trading of other cryptocurrencies. For example, we can refer to the original digital currency of a decentralized exchange that users use to trade other currencies or have the ability to vote in decisions regarding this exchange.

Compound, Curve, Kava, and UniSwap can be mentioned among the top financial cryptocurrencies.

Service Codes

Service cryptocurrencies are coins that provide their customers with the tools to manage personal and organizational data on the blockchain. In simpler terms, service cryptocurrencies are used to help blockchain-based financial products access data outside of the blockchain.

Most of these cryptocurrencies create a digital identity for their customers and link all their records in the real world to that digital identity.


Combining blockchain technology with the real world has many advantages. For example, the digital currency Dentacoin is one of the leading digital currencies used for dental purposes. In addition, Storj and Siacoin are also used to store information .

Other examples of service cryptocurrencies include Chainlink and Filecoin.

the end

After the development of blockchain projects and the increase in the number of people interested in the digital currency market, and we see every day the emergence of new digital currencies and new projects, each of them entering this market with a specific purpose, and many of them become large and successful projects.

Our goal in this article was to present the different types of cryptocurrencies and their uses so that you can choose the appropriate options according to your needs and make logical and correct investments by learning more about these projects and cryptocurrencies.

Frequently Asked Questions

?What are the types of digital currencies

Digital currencies are generally divided into three categories: cryptocurrencies, virtual currencies, and central bank digital currency (CBDC).

?What are the advantages of digital currencies

The most important advantages and strength of digital currencies are their speed, high security, and privacy.

?What are the types of cryptocurrencies or cryptocurrencies

The cryptocurrencies themselves are divided into different types, which include: payment cryptocurrencies, infrastructure cryptocurrencies, privacy cryptocurrencies, stablecoins, memes, financial cryptocurrencies, and service cryptocurrencies.

?What is the difference between digital money and electronic money

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