What is the basis of digital currency (What principles does digital currency use)?

08/16/2023 21:28 • Metaverse Matters • 57 views

What is the basis of digital currency? In the field of digital currency, the development speed of blockchain projects represented by Bitcoin is very fast.

On December 16, 2018, Coinbase, the largest cryptocurrency exchange in the United States, released the Beta version of its Ethereum-based platform and launched a token similar to stable coins like Libra.

According to official information, this platform is one of the earliest companies to apply blockchain technology to the financial sector. In early October 2019, the Japanese government started regulating domestic banks and payment systems. Afterwards, the Bank for International Settlements (BIS) released a report stating that the People’s Bank of China is cooperating with central banks of different countries to develop digital currencies, CBDCs, and other alternative solutions.

The emergence of these new technologies undoubtedly signifies a transformation of traditional business models and gradually pushes some traditional institutions out of this market. However, at the same time, as people are increasingly aware that digital assets have become mainstream and widely accepted, more digital currencies may emerge in the future, including blockchain.

So why do so many enterprises choose to use blockchain? In fact, there are several reasons:

1. The adoption of blockchain technology by enterprises is crucial.2. The types of digital wallets are more flexible.3. Due to differences in laws and regulations in different countries, the issuance of digital currencies can become relatively difficult to understand.4. Currently, most business scenarios of enterprises are not very convenient and require constant exploration of new profit models.

Another question is whether there will be many problems or risks if there is no such mechanism. Therefore, we can categorize all digital currencies into two types: one is issued by users themselves, and the other is managed by third parties as digital assets.

What principles does digital currency use?

The use of digital currency can be explained from the following aspects: first, it starts from the payment system, which essentially is a form of electronic cash; second, it circulates and is used in financial markets as a legal form of currency with guarantee and paper money and coins; third, it is based on physical assets for value exchange.

Specifically, digital currency is a new form of currency established through blockchain technology – a type of virtual asset encrypted and stored as a unit of account. It is used as a medium of exchange, a measuring tool, and a digital version or other type of credential for goods or services, which can be used for various transaction records and as a means of verification for important events in the real world. Fourth, it is directly issued by the central bank, which has significant advantages. Fifth, it allows settlement without a bank account and requires a certain storage period. Sixth, it starts from the national level to develop its own economic system and institutional arrangements, making the entire society able to engage in international trade in a more fair and just manner.

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What is the basis of digital currency (What principles does digital currency use)?

What principles does digital currency use?

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