Digital currency also known as electronic currency or digital money is a type of currency only available in digital form.
There are not in physical form,examples are banknotes and coins.
Digital currency allows immediate transactions and border less transfer of ownership not withstanding that digital currency has similar components and properties to physical currencies.
Cryptocurrencies have been drawing significant interest over the last several months, according to Charles Bovaird, a financial writer and consultant who has worked for State Street, Moody's and Citizens Commercial Banking.
He currently holds Bitcoin and Ethereum, these are the two leading types of digital currency, and believes that the future is bright for digital currencies.
He said "This growing visibility is evident in both Google Trends search data and also the rising market values of the digital currencies
Zack Friedman, founder and CEO of Make Lemonade who also has other careers including working with a global energy company, hedge fund investing and jobs with The Blackstone Group and Morgan Stanley, said cryptocurrencies have undisputed advantages but an uncertain future.
"Proponents of cryptocurrencies includes several key advantages, such as; decentralization, anonymity, security and automation";
"However, investors are split regarding the stability and merits of cryptocurrencies, with some believing they represent the wave of the future, while others dismiss them as pure speculation". Friedman said.
Digital currencies are based on blockchain technology. According to Friedman, digital currencies has potential to disrupt currency and much more.
"Blockchain technology, which is the backbone of digital currency, has the potential to disrupt financial services by reducing the cost and complexity of financial transactions, while also augmenting transparency", he said.
"The implications of blockchain technology are far-reaching, not only in financial services, but in other areas such as healthcare, government, law, education, technology and many more"
One of the greatest benefits of cryptocurrency is that cryptocurrency cannot be counterfeited and transactions cannot be reversed arbitrarily
by the sender just as credit card charge backs do.
Additionally, cryptocurrency transactions provides anonymity. Credit cards operate on the basis where the store identifies the transaction and "pulls" the amount of the sale from the card.
Cryptocurrency uses a "push" model which prompts the cryptocurrency holder to send exactly what they want to the seller without any other form of information.
One other benefit is how cryptocurrency is not bound by exchange rates, interest rates or transaction charges.
In addition, digital currency transactions take place at the same speed, regardless of where the sender and receiver are located.
Despite the popularity and positive price performance, digital currency is not without risk. Leading investors such as Ray Dalio, founder of
investment firm Bridgewater, called Bitcoin a "bubble," while Jamie Dimon, CEO of JPMorgan, has criticized non-flat cryptocurrency,
which is currency not backed by a government.
Before investing in cryptocurrencies, investors also should consider several risks, including price volatility and regulatory intervention.
Therefore, retail investors should expect volatility and significant price swings as markets develop. While cryptocurrencies have experienced massive growth, they currently remain a relatively small part of the global financial ecosystem.
Regulators and policymakers will continue to monitor cryptocurrencies to determine any potential impact to financial stability or broader systemic risk."
The future of cryptocurrency means allowing you to have ultimate control over your money, who you send it to, and what types of fees you don't have to pay. In general, it is slowly becoming one of the fastest adopted forms of payments online because of all of its attributes aforementioned.
The benefits of cryptocurrency in today's economy could appear to be earth-shattering, breaking down geographical barriers, and saving the consumer quite a bit of cash on the back end of a purchase.
But, cryptocurrency doesn't come without risk, so become familiar with key concepts before becoming an investor.