Digital Currencies (Crypto Currencies)
A new financial product that has been gaining momentum in recent years. The digital currency is issued by a private body that develops a technology that can not be duplicated. The currency usually does not belong to the body that issued it but is open to everyone. In fact, it is a protocol (software), running simultaneously on thousands of computers and registered by them. This means that the currency is in a distributed database. This is in contrast to the bank, for example, that all the transactions made through it are recorded only in the bank's computers. Encryption causes the amount to be produced from the coin to be limited and known in advance, but it can grow in a controlled manner over time. Determining a limited amount is important in order to prevent a decrease in the value of the currency (inflation).
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Encryption is also intended to ensure that the transfer of coins from person to person will be recorded in thousands of computers and approved by them. This technique is designed to prevent duplication of the coin and its reuse by the same person after it is sent to another person. The issuer body tends to keep a certain percentage of its currency. If the value of the currency rises (in terms of regular currencies such as dollars or euros), it will of course generate profits. The first digital currency used was Bitcoin, which was issued in 2009.
The main advantage of digital currency is the fact that it is easy to transfer it from person to person through computers or smartphones, without paying any commission to the intermediary body (bank). Another advantage is that the currency is not regulated, and therefore it is not possible to collect tax on various transactions.
Lack of supervision is also the main drawback. A person who has lost his personal code (which may happen, of course) will not be able to reach his pool of Bitcoins. This is analogous to the loss of a wallet with cash. The loss of such a wallet removes the lost currency from circulation.
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