The essence of money - is one of the fundamental questions in the economic theory. What is a point in digital and traditional (cash, for example) money?
Why is it so important to find out what the matter is? The answer is “on the surface”. The deep understanding of the basic principles of money and digital economy enables to forecast whether it could be possible or not that cryptocurrency superseded fiat currency.
Digital currency vs real money
The economists and financial experts have long ago determined a lot of meanings of what money
is. Though the vast majority of the terms differ one from another, they do still reflect the nature of the issue adequately. The difference comes from an aspect used to explain the matter.
We shall further determine money as a kind of an instrument, so-called intermediate asset assuring the indirect barter, used for a deal when there is no other opportunity to assure a direct barter. You can read more about how the early forms of money evolvement in the following article - “Simply about Bitcoin and blockchain”
. The important features of money are high liquidity (demand), and known exchange rate.
Money can be divided into real
. Moreover, there are different definitions of these concepts. Here we believe that digital money is money whose payment capacity is not guaranteed by the government. These are private electronic money as a units of non-governmental payment systems (electronic wallets have become quite popular by now), and cryptocurrencies. From this perspective, real money, whose payment capacity is guaranteed by the government, respectively, includes cash/non-cash money (kept on a bank account, for example), and governmental electronic money (in national currency as a part of governmental payment system).
You can learn more about cryptocurrencies, its pros and cons in the article "What is cryptocurrency - let’s make things simple"
Though digital currencies, including cryptocurrencies, are not governmentally regulated, they are still reliable enough. The decentralized program algorithms do provide the principle integrity of the cryptocurrency payment system.
Talking about the other differences between non-cash and cryptocurrencies, it is important to mention that before the non-cash money are deposited on the account, they are to be physically passed to the account via terminal, or payment system’s cash register. The “Emission” of cryptocurrency is performed directly in the Internet; it does not always need to be exchanged to cash, or non-cash money.
Besides, cryptocurrencies have the following characteristics:
— They are quite accessible (there are no and cannot be any restrictions for people aged under 18, and from particular countries to use them);
— They are decentralized and poorly regulated by the governments and/or banks, respectively. That is why it is possible to send funds to any corner of the world with no financial or legal restrictions via Internet;
— They are characterized with the lower payment charges due to the fees do not depend on the transfer amount. A lot of cryptocurrencies transfer amounts equaling a dollar or less charged with little fees;
— They are more confidential than any other types of money including money provided with governmental guarantees.
Importance of cryptocurrencies for digital economy
Digital currencies are most applicable to ensure the work of digital economy. The existence of such an unusual sphere of economics would not be possible if not the progress of the Internet and computers. First of all, it is due to the digital economy products are produced and spread specifically with the help of the computing techniques. The character products of digital economy are video games, which are based on the augmented reality, and virtual environments, and digital multimedia products (online-cinemas, or Youtube videos).
Another important feature of the digital economy is the steady demand for digital products; the demand for digital products is not going down while using the already purchased products. At least, it is not going down fast. Thus, under the conditions of the real economy, there is little likelihood that a client will buy another cell phone after recently buying the one. The chances are low at least for two months after the purchase. However if a person have watched a TV series, played a video game, or consumed any other virtual economy product and liked it, he/she is likely to start experiencing a desire to purchase yet another virtual product of the same manufacturer.
Generally, within a virtual economy domain, the demand for the digital products is not going down while using the already purchased products.
Thus, digital economy is characterized by an active demand of every particular client for products of the same kind (like video games on historical subjects), or some types of similar digital products of different spheres of gaming industry. This models a regular clientele liable to purchase new games and films at reputable manufacturers, enhancing the money resources frequency, and company’s overall performance. In general, digital economy has the same growing potential explained by the opportunities of demand expansion.
Virtual currencies, in particular, cryptocurrencies are more suitable for the virtual economy than traditional money on bank accounts. In case when a group of people from different continents creates successful digital products consumed by the users from 150-200 countries, the use of cryptocurrencies resolve a number of issues. These are international financial barriers, surplus of fees under convertation, slow transactions, and so forth. That is why the rise of trading volume in digital economy supports the rise of demand for cryptocurrencies and its rate, like bitcoin rate
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Additional materials that may help you:
Cryptocurrency rate changes: reasons and factors
Verification process with EXMO
Bitcoin futures: features and perspectives
Reach more profit on EXMO – gain 25% more
Trade figures – what indicators to choose? Part 2
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