Understanding the Concept of Virtual Currency: What is it?

Introduction

Now Virtual Currency is nothing but electronic money that can be only transacted through electronic means, like through your cell phones through the internet or over a network.

Any currency that can be transacted through all of the above mediums is called Virtual Currency, now Is Cryptocurrency also a virtual currency? Yes! Cryptocurrency is also the Virtual Currency that can be transacted using digital wallets, exchanges and DEX platforms.

So, why are we discussing Virtual currency? The answer to this question is that for understanding the new set of financial worlds, it is important to know about the specific elements that combine to envision a new economy. If you are interested in bitcoin trading visit https://allin1bitcoins.com/bitcoin-prime/

When did the Term Virtual Currency come into existence?

Referring to all such currencies that are transacted digitally and are unregulated by any third parties in 2012. Also, the reason behind coining the term Virtual Currency was that it was controlled by the developers of its origin, they used it as a payment system to trade within their specific group of community.

Also, it is denoted as the functional value of a digital account which has a stored form of value and can be used as a medium of exchange.

What are the Types of Virtual Currency?

Now it must also be clear that these currencies are highly unregulated and that sometimes they fail as a trading medium in some specific area of usage.

However, these currencies are differentiated based on the types of their operating network which is as follow:

·       Closed Virtual currency

·       Open Virtual currency

1.    Closed Virtual currency

Closed system, this name itself denotes the purpose of this currency which is, it can only operate in a closed financial ecosystem.

It is not convertible, like the other cryptocurrencies or tokens that get converted into some other form of currencies and can be traded.

However, this is not the case with the Closed Virtual currency, because neither it can be converted into virtual currency nor it could be converted into a fiat currency.

These types of currencies are highly used in Virtual games example: Airline Miles.

2.    Open Virtual currency

These currencies are just opposite of the first one, you can say it is the counterpart of the closed currency, they are interconvertible and are free to be traded in an open ecosystem.

Also, they are given the liberty to be converted into one form to another i.e., from one exchange medium to another.

Example: Stablecoins.

What are the Advantages of Virtual Currency?

Virtual currencies even being unregulated has lots of advantages like:

·       Virtual currencies don’t have any physical storage cost as they are transacted online.

·       Virtual currencies when used as open currencies eliminate the need for any third parties and are based on a decentralized setup.

·       Virtual currencies are given liberty to be programmed in such a way that they can be operated in an automated transaction.

·       Virtual currencies are the subset of the digital currencies like cryptocurrencies and can be assigned as the value of gaming tokens, etc.,

The Bottom line

Virtual Currencies are the digital representation of those values that can be operated in any closed financial ecosystem or the open-source protocol, also at the same time they are the interconvertible and non-convertibles, but they are the fastest transactable currencies that eliminate the need for any intermediaries.

 Also, they are subjected to market risk, therefore one must invest in them after checking their background and nature of the transaction.