What is Virtual Currency?
February 12, 2019 4:15 pm,
Virtual currency can be considered as a classification or type of digital currency, which is most commonly used in gaming arenas and online platforms. Virtual currency, unlike some other currencies is never available in physical form. The main use of virtual currency starts and ends within the digital realm. It is highly deregularized and decentralized, making it illegal for transactions in certain countries. It is generated by certain platforms and mainly used as tokens for the buying and selling within that platform. There are both centralized and decentralized virtual currencies, but are often very hard to differentiate from each other. Even though not as famous as the bitcoins and other cryptocurrencies, virtual currency is still a very practical and highly used niche in the digital currency realm.
Types of Virtual Currency
When it comes to virtual currency, there are mainly two types based on the flow of currency. There is closed type of virtual currency where the financial implications and usability of the coins are not extended to the real economy. As mentioned before, they are just used in gaming platforms and not anywhere else. These currencies are unfit for any type of real world transactions. This type of cryptocurrency is also known as Fictional cryptocurrency. Then there is convertible cryptocurrencies, which can be used for financial transactions in the real world. This type of virtual currency can loosely be understood as cryptocurrency. There is a very thin line separating all these kinds of digital currencies and hence, are used interchangeably most of the time. This may not be accurate at times.
Centralized vs Decentralized
There is both centralized and decentralized type of virtual currency. The centralized one, as the name implies, has a centralized authority in charge of the supply and exchange of these currencies. Decentralized ones are very hard to locate when it comes to source of supply. It is not regularized and has no one to hold responsible for. The normal cryptocurrencies show this characteristic, and is one of the most prominent features. But unlike cryptocurrency, the virtual currency has a limited usage.
Virtual currency, digital currency and cryptocurrency
These three terms are often confused and used instead of the other. Even though they share a good amount of similarities, they are not the same. Digital currency is the largest of them all, and both virtual and cryptocurrencies come under digital currency. So, it is safe to say that virtual currency is a type of digital currency. It shares some of the characteristics of digital currency, but is unique in its own ways. As mentioned earlier, virtual currency can be both centralized and decentralized. The cryptocurrency comes under the latter part of the virtual currency. Even though they are almost similar to each other, the practical implications of cryptocurrency is much larger.
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