Digital currency seems to be a new vocabulary for the man in the street, especially on the African continent. Yes, the world is now witnessing the shocking dawn of the digital currency, which is already making waves and sending a message that it is here to stay.
What is a digital currency?
Digital currency is a form of electronic money which is as liquid as normal currencies. There are currently over 600 digital currencies in the world market known as ‘crypto-currency’. They operate the same way as regular currencies, except that they use cryptographic techniques to ensure they cannot be changed. Cryptography offers with it the ability to securely store and transfer sensitive information.
They are based on complex computer encryption and mathematics rather than the traditional money and the banking system. Crypto-currencies 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 people who use that system. This allows users more control of their own money because there is no central control from any governments.
Governments explore digital currency
As the digital currency forges ahead into the next generation of money, governments and banks are starting to create their own digital currencies to allow for faster and cheaper solutions to the clients. The first digital currency is called Bitcoin, which many governments abroad have already found ways of regulating. Bitcoin is the only digital currency that acts as normal money currently existing in the mainstream market.
“Some governments across the world have already found ways to regulate Bitcoin, as they begin to understand that the Bitcoin technology is revolutionary and taking us into the next level of banking,” South Africa-born Shireen Ramjoo, founder of Liquid Crypto-Money Institute, said.
Bitcoin is a limited series because it was designed as a wealth enrichment currency. As a result, the supply and demand factor of economics comes into play. As more people start using it, the demand rises and its limited-series property makes it to become lesser. This in-turn allows for the currency price to continually rise, as long as its demand continues to grow. It is also viewed more as a commodity than a general currency.
Advantages of using digital currency
Digital currency is cheaper than using normal currencies. One can now send money directly to anyone in the world and it can be cleared in minutes. There is no need to wait for the banking system’s traditional verification and clearing processes that usually takes a number of days.
Another advantage is that there is a minimum fee to transfer money whether it is R100 (US$7.80) or R1 00 0000 (US$76 823). It is a standard fee of 0.01%.
‘Taking control of our finances’
“Essentially, what we are seeing is that we now have more options to becoming our own bank and taking full control of our finances. The blockchain technology has brought with it another level of how we will now be doing banking and refining it in the future,” Ramjoo said.
The blockchain is a revolutionary transparent system that was created in 2009 with Bitcoin, the world’s first digital currency. It is a public-ledger recording all the worldwide transactions of users transferring or receiving Bitcoin and updates live. Anyone can view this at anytime and moment. This is the key innovation that Bitcoin brought and what allows it to be decentralised, and other cryptocurrencies stem from.