History advances in uneven steps. Just as digital banking is creating new possibilities in the financial industry, another innovation is digital money, which is bringing rapid and significant changes in the way we relate to money.
Before the advent of digital money, many people relied on physical money as a means of transaction. However, one of many drawbacks of physical money is the inability to access it when it is frozen.
A frozen account leaves the account holder stranded, confused, and frustrated. However, you can learn how to unfreeze your bank account whenever it is frozen and stay on top of the game as part of the strides brought about by the advent of digital money.
What’s Digital Money?
Digital money is a type of money that’s available in digital form and can be used to conduct online transactions. Digital currency might be stored in a centralized database or what is known as a blockchain or decentralized ledger. As we use physical money to make transactions in the traditional banking system, we have digital currency available in digital forms to make transactions.
So, is digital currency the same as cryptocurrency? Not certain. Cryptocurrency is a type of digital currency. The major area of difference is this – while digital technology is a necessity in creating a workable cryptocurrency, you don’t need cryptography to create a currency that’s in the digital form.
The Birth of Digital Money
The rise of digital money is traced to 2009 when Bitcoin began to take the world by storm. However, the birth of digital currency took place around the 1960s when American Airlines and IBM came together to build a Semi-Automatic Business Research Environment System. The first innovation resulted from the collaboration, allowing office terminals to use telephone lines to turn cash into virtual credit.
This was the first attempt at digital money. Later, the first use of electronic money started in 1970 when banks started using mainframe systems to track or monitor monetary transactions. However, in 2009, the whitepaper for Bitcoin was developed by Satoshi, and that development marked the beginning of decentralized digital money.
Relevance of Digital Money
Cryptocurrency, one major form of digital money, has significantly disrupted the financial space in the last decade. They are used to making transactions and purchasing almost everything, including buying a home and engaging in all kinds of services.
One unique thing about these currencies is that they have reduced the power of both money creation and the central control of monetary operations all around the globe. Before the advent of digital money, the central banks of each country had control of everything revolving around money in their respective countries.
However, digital currency relinquishes such power and puts it in the hands of the digital account holder. However, this comes with its own problems. For instance, digital money has a democratized force whose usage is unregulated.
Therefore, along with many advantages, they can also be used to engage in harmful activities. To ensure they gain autonomous control over its unregulated nature, many governments across the globe are trying to introduce their own digital currency that can be regulated.
However, even with the development, only a few digital monies can be used to perform quick and autonomous cross-border transactions. This removes the bank’s involvement in either charging a fee or blocking the transactions. This is one of the huge advantages digital money gives its holders. However, this also comes with a drawback.
For instance, the price of digital money is not always stable. It fluctuates very rapidly. So, there is always a risk of the investment being a failure, especially for newbies in the digital space.
As a result, most digital currency is considered to be a speculative asset, and investments that accept such currency do not use it to make transactions. However, digital currency is the best form of money that can keep you safe against inflation.
Emerging of Central Bank Digital Currency
To address some issues associated with digital currencies such as Bitcoin, Ethereum, and others, many central banks all over the world are planning to introduce their own digital cash, which will be referred to as central bank digital currency.
As earlier said, this is done in an attempt to regulate their digital money like it is done for the physical ones. The central bank’s currency will be created to match the speed of other digital currencies in the digital space with the intention of removing the risk associated with it.
Countries with a large percentage of input into the global economy are leading the way in creating the new possibility of ensuring that the government stays in control of every financial-related matter, either in real life or in the digital space.
The work on this innovation is in progress. Social media platforms have started to intensify their effort to create their special digital currency. For instance, in 2019, Facebook announced its digital currency, Libra, which was recently renamed Diem.
While we may consider the Central bank’s digital currency to be safe for user transactions, we can’t say definitely that it is completely safe because there will always be a risk of compromised privacy and cyber security attacks. Only time will tell how the government will handle or run digital money and win the trust of its citizens. Over time, the government has failed in many areas to win their citizens over to their side by the quality of services they render.
Also, there is a fact that we have many forms of digital currencies, and which form manages to turn the trust and confidence of the citizens will also play a significant role in determining how people accept something of such from the government in the future.
In conclusion, digital money has evolved at lightning speed, bringing numerous possibilities and qualities that win people’s trust. Unlike the traditional system, where someone or a group of individuals is in control of your money and can determine what operation you can perform on your account, digital money gives you unrestricted access to your money anytime and day.
You don’t have to wait till your bank account is frozen before you maximize the possibilities and advantages of digital money. Have a digital wallet with digital currency and enjoy unlimited access to cross-border transactions and other services digital currency offers.