You are Here > My Banking > What is digital currency?

What is digital currency?

Apr 10, 2017

digital curencyDigital currencies are a form of electronic money, that are as liquid as normal fiat currencies. There are currently over 600 digital currencies – also known as cryptocurrency – that are already in the market. They function the same way as regular currencies, except that they use cryptographic techniques to ensure they cannot be changed. Cryptography offers the ability to securely store and transfer sensitive information.

Cryptocurrencies are based on complex computer encryption and mathematics rather than the traditional money and banking system, that can now provide faster and cheaper financial solutions. They are not backed up by a country’s central bank or gold reserves but by the distributed community of users of that system. This allows users more control of their own money because there is no central control from any government.

However, as we move into the next generation of money, governments and banks are starting to create their own digital currencies that will allow for faster and cheaper solutions for their citizens and clients.

Many governments abroad have already found ways to regulate Bitcoin, which was the world’s first digital currency.  Bitcoin is the only digital currency currently in mainstream market that acts as normal money.

“Some governments worldwide, have already found ways to regulate Bitcoin, as they begin to understand that the technology that Bitcoin is built upon, which is a revolutionary one, is taking us into the next level of banking,” says Shireen Ramjoo, Founder of the Liquid Crypto-Money institute.

Limited supply

Cryptocurrencies such as Bitcoin were designed as a wealth enrichment currency, as it is a limited series. Because of this, the supply and demand factor of economics come into play. As more people start using it, the demand rises, and because there is a limited supply, this causes the price of the currency to continually rise. So it could be viewed more as a commodity than a currency.

Using digital currency is also much cheaper than using normal currencies, because there is no need to use a middle-man – in this case, a bank. You can now send money directly to anyone in the world and it can clear in minutes. There is no need to wait for our banking system’s traditional verification and clearing processes that could take several days. Another advantage is that there is a standard fee of 0.01% to transfer money – whether you’re sending R100 or R1 000 000.

“Essentially, what we are seeing is that we now have more options to become our own bank and to take full control of our finances, if we choose. The blockchain technology has brought with it another level of how we will now be doing banking and refining it in the future,” says Ramjoo.

The blockchain is a revolutionary transparent system that was created with the world’s first digital currency, Bitcoin in 2009. It is a public ledger that records all the transactions that happen worldwide of users transferring or receiving Bitcoin, and it updates live. Anyone can view the ledger at any time. This is the key innovation that Bitcoin brought, and what allows it to be decentralised. And this is what other cryptocurrencies stem from.

This article was based on a press released issued by the Liquid Crypto-money Institute.


Maya Fisher-French author of Money Questions Answered

Previous Articles

Inside a cryptocurrency scam

Social media networks are being used to lure people into a cryptocurrency scam. A sophisticated social media network is being used to con South Africans by claiming to generate huge returns through trading. The network is made up of 300 fake twitter accounts...

Working from home? You can claim from SARS

Elani van der Westhuizen, senior tax technical at TaxTim, explains what you can claim from SARS if you've been working from home. There's some good news for you if you’ve been working from home for the past year. You can claim a tax deduction if you worked from home...

Video: Set goals for money success

The key to achieving our money goals is to use psychology to set us up for success. When it comes to our money goals, behavioural economist Erik Vermeulen says we need to set specific long-term goals, but also have built-in intermediate success measures to make our...

Anger over high-cost investment products

A blame-game is starting with complaints about overpaid financial advisers and expensive product options. Readers have provided numerous examples of high-cost investment products sold by advisers working for large insurance firms. Clients are angry about high fees and...

Finding a more equitable credit model

The Save2Buy model is a hybrid between a lay-by and more traditional credit. In a world where credit has become a way of life, is it possible to find a system that allows someone to purchase an item and have use of it whilst paying it off, but without being fleeced by...

Can you bag a cheap deal on an overseas holiday?

Taking an overseas holiday is still possible but this can come at great risk to travellers’ pockets, finds Angelique Ruzicka. Differing social distancing rules and travel bans imposed by countries and airlines have done much to disrupt the global travel industry,...

Listen: Investigating crypto scams

In this My Money, My Lifestyle podcast we delve into the world of crypto scams which seem to be mushrooming everywhere, despite repeated warnings from our authorities. How do these crypto scams work? How do people get lured into parting with their hard-earned cash?...

Video: Understand your electricity bill

The cost of electricity will increase by 15% in April. That is triple the rate of inflation which means a bigger portion of our budget will go to paying for electricity. It is worth taking the time to understand how your electricity is charged for and to find ways to...

When does it make sense to have a travel allowance?

If you are required to travel for work there are several ways to claim for this expense. You can receive a travel allowance or be provided with a company car. In the case of a travel allowance, the employer would normally pay a set amount, for example R5 000 a month....

FSCA issues crypto health warning

The FSCA wants to warn the public that if something goes wrong with your crypto investment, you are not likely to get your money back and will have no recourse against anyone. The Financial Sector Conduct Authority (FSCA) has noted with concern the increasing volume...

Pin It on Pinterest

Share This