What is virtual currency? New Possibilities of Digital Money

Virtual currency is an innovative form of currency that opens up new possibilities for digital money .

In recent years, its presence has increased rapidly, and it is beginning to have a major impact on the world of finance and economics.

In this article, we will explain in detail what virtual currency is its characteristics, usage risks and future .

[What you can learn from this article] 

  • What is virtual currency
  • Advantages of cryptocurrencies
  • Three technologies and mechanisms that make up virtual currency
  • Virtual currency type
  • Disadvantages of virtual currency
  • How to use virtual currency
  • How to get virtual currency
  • The future of virtual currency

Contents 

  • What is virtual currency (cryptocurrency)?
    • Cryptocurrency (Crypto Assets)/Bitcoin Origins
    • What is the difference from electronic money
  • Advantages of virtual currency
    • (1) Decentralized management
    • ②You can send money directly between individuals
    • ③ There is an upper limit to the number of issued cards
    • ④It is a universal currency
    • ⑤ Can be traded with low fees
    • (6) Possibility as an investment target
  • Three technologies and mechanisms that make up virtual currency
    • ①Blockchain
    • (2) Public key cryptography technology
    • ③ Mining
  • Virtual currency type
    • ① Ethereum
    • ② Litecoin
    • ③ Bitcoin Cash
    • ④Ripple
  • Disadvantages of virtual currency
    • ① High risk
    • ②There are legal issues
    • 3) Limited availability
  • How to use virtual currency
    • ①Investment
    • (2) Money refuge
    • ③NFT transactions
    • ④Shopping
  • How to get virtual currency
    • ① Purchase at an exchange
    • ② Mining
  • The future of virtual currency
  • summary

What is virtual currency (cryptocurrency)?

Virtual currency is digital money created using cryptographic technology . Specifically, Bitcoin is one of the representative virtual currencies.

Cryptocurrencies are not managed or issued by central banks or governments, but are based on blockchain, a decentralized technology. This has made it possible to carry out direct transactions between individuals and to make cross-border remittances quickly and securely.

I will explain the details of virtual currency and blockchain later.

Cryptocurrency (Crypto Assets)/Bitcoin Origins

Bitcoin is the first and most popular cryptocurrency . Bitcoin was launched in 2008 by a person or group named Satoshi Nakamoto , but its identity is still shrouded in mystery .

Bitcoin has been attracting attention as a decentralized digital currency and is used by many people.

It has attracted attention as an investment and trading object for some, and as the future form of currency for others . Also, many cryptocurrencies were born inspired by the success of Bitcoin .

What is the difference from electronic money

Both cryptocurrencies and e-money are digital means of payment , but each has some differences.

The first big difference is that cryptocurrencies are based on decentralized systems . This means that transactions take place without reliance on centralized institutions like central banks or governments .

On the other hand, electronic money is based on a centralized system and is issued by banks and credit card companies .

Various other differences exist.

virtual currency

  • Ensuring transaction transparency and security using blockchain technology
  • Transactions can be anonymous
  • Easy cross-border transactions

Electronic money

  • Used in advance by charging or linking with a bank account
  • Requires you to provide your personal or account information to the publisher
  • Usage is limited by country or region

Due to these differences, virtual currency and electronic money can be said to be digital payment methods with different characteristics.

Advantages of virtual currency

Virtual currency has various characteristics as the reason why it has attracted a lot of attention .

Here, we will introduce six main characteristics of virtual currency.

(1) Decentralized management

Conventional currencies were generally issued and managed by a central bank , but virtual currencies do not rely on centralized institutions and are traded in a decentralized system.

This makes cryptocurrencies more secure and transparent than traditional currencies .

②You can send money directly between individuals

Cryptocurrencies are traded using blockchain technology .

By using this technology, it is possible to transfer money directly between individuals, which has the advantage of reducing costs compared to transferring money through conventional banks .

③ There is an upper limit to the number of issued cards

Virtual currencies often have an upper limit on the number of issued coins , and when the upper limit is reached, new currencies cannot be issued.

For this reason, it is expected to prevent currency inflation and stabilize its value .

④It is a universal currency

Cross-border transactions are easy with virtual currencies, and the same currency can be used all over the world regardless of region or currency .

Due to this feature, it is said to be highly convenient in international transactions .

⑤ Can be traded with low fees

Fees are kept low because cryptocurrencies are sent and traded without going through traditional banks and financial institutions . Especially for international remittances, the fees are much cheaper than traditional methods .

This enables low-cost and efficient transactions , which can bring economic benefits to individuals and businesses .

(6) Possibility as an investment target

Cryptocurrencies are also attractive as investment targets. With high price volatility and growth potential some cryptocurrencies can be highly profitable for long-term investment.

In addition, with the advancement of blockchain technology and the emergence of new projects it is expected to be applied to various industries and businesses .

The benefits of cryptocurrencies are not limited to these, but the high degree of freedom, low fees, and investment possibilities are the distinctive attractions of cryptocurrencies .

By taking advantage of these advantages while addressing safety and regulatory issues, the future potential of cryptocurrencies will continue to expand .

Three technologies and mechanisms that make up virtual currency

There are several important technologies and mechanisms that underpin the workings of cryptocurrencies.

Below, we will introduce the three main technologies and mechanisms that make up cryptocurrencies.

①Blockchain

Blockchain is the most important technology of virtual currency . Blockchain is a technology that records the transaction history of cryptocurrencies.

Its blockchain technology is a distributed ledger , ensuring transaction transparency and reliability , and preventing manipulation and tampering by central authorities .

(2) Public key cryptography technology

Public key cryptography is used to protect the security of cryptocurrencies . Public key cryptography is a technology for safely conducting virtual currency transactions .

The sender uses the other party’s public key to encrypt and the receiver uses the private key to decrypt, ensuring a secure transaction .

③ Mining

A process called mining exists to issue cryptocurrencies and verify transactions . Mining involves computers on a network solving complex computational problems to generate new cryptocurrencies while simultaneously verifying transactions and adding them to the blockchain .

Mining is a competitive process , and the first computer to solve a problem receives a cryptocurrency reward .

By combining these technologies and mechanisms, virtual currency has the characteristics of a decentralized digital currency, enabling direct transactions between individuals and international transactions while ensuring security and transparency . increase.

Virtual currency type

There are various types of currencies in the virtual currency world .

Here, we will focus on some representative virtual currencies and introduce their characteristics and purposes of use.

① Ethereum

Ethereum is the second most popular virtual currency after Bitcoin . Ethereum offers a decentralized platform that can run programs called smart contracts .

This will enable token issuance on decentralized applications and blockchains . Ethereum is favored by many companies and developers due to its flexibility and scalability .

② Litecoin

Litecoin is one of the derivatives of Bitcoin and is known as a currency with high popularity and safety . Like Bitcoin, Litecoin uses blockchain technology to enable fast and low-cost transactions .

Litecoin is also easier to mine than Bitcoin and offers faster processing speeds .

③ Bitcoin Cash

Bitcoin Cash is a virtual currency derived from Bitcoin , aiming for more scalable transactions . Scalability refers to the ability and degree to adapt to an increase in users and work .

Besides, Bitcoin Cash has a larger block size than Bitcoin , and is said to be able to process more transactions . Block size refers to the amount of data that one block can store in a cryptocurrency blockchain .

This makes Bitcoin Cash a fast and low-cost means of payment .

④Ripple

Ripple is a virtual currency intended for instant settlement and international remittance between financial institutions . Ripple uses its own consensus algorithm, an algorithm for forming consensus among multiple nodes (computers) such as distributed systems and blockchains, and achieves high-speed transaction processing .

In addition, remittances on the Ripple network are low cost compared to other currencies, so it is attracting attention as an innovation in the international remittance industry .

There are countless other types, and each virtual currency has different characteristics and usage methods , so it is important to choose the virtual currency that suits you.

Disadvantages of virtual currency

Cryptocurrencies have innovative technology and advantages, but they also have some drawbacks.

Below are the disadvantages of cryptocurrencies.

① High risk

The cryptocurrency market is highly volatile, with frequent price spikes and dips . As a result, investments and transactions may be more risky .

Investors and trading participants may suffer losses due to price fluctuations, so careful judgment and risk management are required .

②There are legal issues

Virtual currency is still an emerging field, and legal regulations and definitions may not be clear. Governments and financial institutions around the world are exploring legal approaches and regulatory measures for cryptocurrencies , but uncertainty still remains.

For this reason, legal issues and risks may arise in investments and transactions .

3) Limited availability

Virtual currency is still a developing field , and the places and services that can be used may be limited . While some online stores and exchanges allow payment in cryptocurrencies , its use in retail and service industries is still uncommon.

For this reason, cash and credit cards are still the mainstream in daily life .

The drawbacks of virtual currency are not limited to these, but the high risk, legal issues, and limited places where it can be used are challenges that virtual currency faces .

In the future, it is expected that these shortcomings will be eliminated as technology develops and legal arrangements progress . It is important to understand and carefully address these shortcomings when investing or trading .

How to use virtual currency

Virtual currency has various uses as an innovative digital currency.

Below are some of the major uses of virtual currency.

①Investment

Cryptocurrencies are attracting people’s attention as an investment target due to the magnitude of their price fluctuations . Major cryptocurrencies, especially Bitcoin and Ethereum, have experienced significant price increases over the years.

Investors can buy cryptocurrencies and aim to profit from future price increases.

However, as prices fluctuate wildly, careful investment decisions and risk management are required .

(2) Money refuge

In some countries and regions, the value of the currency may decline due to political and economic instability factors . Under such circumstances, virtual currency may function as a “safe haven” .

Virtual currencies can be owned and traded across borders and remain stable regardless of their value .

③NFT transactions

NFTs (Non-Fungible Tokens), which have been attracting attention recently , are a unique trading format using virtual currency NFTs are tokens that represent ownership of digital art and collectible items, and are traded on the blockchain .

You can use virtual currency to buy NFTs, take ownership of them, or trade them with others .

④Shopping

Some online stores and service providers accept virtual currency as a payment method . By using virtual currency to purchase goods and services, you can conduct transactions without relying on existing currencies or credit cards .

Especially for global transactions, the use of cryptocurrencies facilitates cross-border payments .

There are a wide variety of ways to use virtual currency, but the main forms of use are investment, money refuge, NFT trading, and shopping .

It can be said that virtual currency is opening up new economic possibilities through these usage methods .

How to get virtual currency

There are several ways to get virtual currency.

Below, we will introduce how to acquire the main virtual currencies.

① Purchase at an exchange

The most common way to acquire cryptocurrencies is through purchases on cryptocurrency exchanges A cryptocurrency exchange is an online platform and a place where the general public can buy and sell cryptocurrencies .

Users register on an exchange and purchase virtual currency by exchanging it for real currency (eg, Japanese Yen or US Dollar) Generally, cryptocurrencies are stored in wallets provided by exchanges .

In Japan, the following exchanges are popular.

・CoinCheck

CoinCheck is a Japan-based cryptocurrency exchange founded in 2014.

It is possible to trade multiple virtual currencies , including Bitcoin and Ethereum , and features a user-friendly interface and high security measures .

・bitFlyer

bitFlyer is Japan’s leading cryptocurrency exchange, established in 2014.

It offers trading of major virtual currencies such as Bitcoin, Ethereum, and Ripple , and is highly evaluated for its high liquidity and safety .

In addition, bitFlyer operates both in Japan and overseas , and supports international transactions .

・DMM Bitcoin

DMM Bitcoin is a virtual currency exchange operated by the DMM Group .

The service was launched in 2016 and offers transactions such as Bitcoin, Ethereum, and Ripple.

DMM Bitcoin is developing services for a wide range of users, backed by the reliability and safety of the DMM Group .

・GMO coin

GMO Coin is a virtual currency exchange operated by GMO Internet Group .

Launched in 2017, it offers transactions such as Bitcoin, Ethereum, and Bitcoin Cash.

GMO Coin features robust security measures and an easy-to-use trading interface, and is known as a top-class exchange in Japan.

② Mining

Some cryptocurrencies can be obtained through a process called “mining” . Mining is the process of verifying cryptocurrency transaction data and adding new blocks to the blockchain .

This work requires a high degree of computational power , and dedicated hardware and software are required to perform mining .

Miners can receive virtual currency as a reward .

There are various ways to acquire virtual currency, such as airdrops (free distribution) and exchange campaigns .

Stay up-to-date and get your cryptocurrencies in a safe and efficient way .

The future of virtual currency

Since virtual currency is a decentralized system, it has a high degree of freedom . Therefore, it is expected to spread as a means of asset management and settlement in the future .

Cryptocurrencies do not rely on centralized management, and transactions are conducted in a decentralized system based on blockchain technology .

This enables direct transactions and remittances between individuals allowing free economic activities without the restrictions of systems and regulations .

In addition, since the number of services and products that utilize blockchain technology is increasing virtual currency will become more and more popular in the future.

summary

I have already explained about cryptocurrencies in detail. Since virtual currency is a decentralized system, it has a high degree of freedom, and in the future, it may become popular as a business and payment method.

Its attractions include direct transactions between individuals with a high degree of freedom and economic efficiency due to low fees.

In addition, virtual currency has potential as an investment target and is a market that is expected to grow.

However, due to the high volatility of the price, there is also a risk, so it is necessary to be careful when investing.

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