What are Virtual Currencies

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Virtual Currencies are increasingly becoming a part of not only the virtual world but also the real world. There are many problems associated with virtual currencies. Due to its similar to paper currency, a lot of questions have risen regarding its acceptance among the people in the market. Virtual currencies are growing in popularity and although they were large used by speculators who were looking at it as a way to make money by buying them at a lower prices and selling them at higher prices (much like trading foreign exchange).
According to Zakary M. Seward (2013), “Virtual currencies have been viewed as a form electronic money or area of payment system technology that has been evolving over the last past 20 years” (Seward, 2013). Virtual currency such as Bitcoin are not issues by central bank; instead they are created or mined by a group of anonymous programmers under the name Satoshi Nakamoto (Barry, 2014). Bitcoin can be sent and received through the internet, similar to sending cash digitally. The currency is exchange through the decentralized Bitcoin network, without going through an external financial institution or government. Virtual currency is a big problem. People from all over the word can exchange virtual currencies for traditional currencies through the online services. Many clients exchange goods and services by using virtual currency such Bitcoin. If people buy bitcoins, they don’t physically purchase goods by handing notes or tokens to the seller. They are used for electronic purchases and transfers. A lot of big companies use the form of virtual currency. For example, Apple provides iTunes users the option of buying prepaid iTunes gift cards that contains credits that can be redeemed for music and movies. You...

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...en Perklberg (2013), The Fed doesn’t have the authority to supervise virtual currencies but that they may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system (Perklberg, 2013). The Chinese government restricted Chinese bank from making transactions using bitcoins. Also the reserve bank of India has cautioned the users, holders, and traders of bitcoins about the potential financial, legal, customer protection and security related risk that they are exposing themselves to.
All in all, virtual currency is a new concept but it is in process of being understood and adopted by a growing number of consumers merchant, and investors around the world. Virtual currency poses some technological and financial risks. More consumers, merchants, and investors should start learning about and using virtual currency.

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