What is Virtual Currency?

Blockchain
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Virtual currency is a digital representation of value, other than a representation of the U.S. dollar or a foreign currency (“real currency”), that functions as a unit of account, a store of value, and a medium of exchange. Some virtual currencies are convertible, which means that they have an equivalent value in real currency or act as a substitute for real currency.

The traditional regulated currencies are backed by sovereign debts (fiat currency) or hard assets such as gold. In contrast, virtual currencies are not backed with no intrinsic value. The value of a virtual currency is mainly driven by the sentiment of traders. As a result of its unregulated nature, a virtual currency can experience extensive price fluctuations.

Advantages of Virtual Currencies:

  1. Convenient
  2. Decentralized

Disadvantages of Virtual Currencies:

  1. Lacks comprehensive regulation
  2. Highly volatile
  3. Potential security issues