Digital Currencies and How Do They Work?

Hello Everyone, It's me again @Oslec08 , Today in this article i will be discussing and showing you different Digital Currencies and how do they work?.

Disclaimer: All the written information below is just based on my understanding if you see some wrong information written please feel free to correct it on the comment section below.

Digital currencies - are electronic money that aren’t denominated by any national currency, nor are they produced by any government-endorsed central banks. These currencies are known as “alternative currencies,” and are sometimes called “altcoins.”

Many digital currencies are cryptocurrencies, a type of digital currency that relies on cryptography, as well as a proof-of-work scheme. Essentially, it involves a mathematical process to create the currency at a reasonable rate so that the currency doesn’t become too numerous, and thus, lose its value. Bitcoin was the first cryptocurrency, while many others have followed.

Another top digital currency is Litecoin.

Litecoin was one of the first cryptocurrencies following Bitcoin. This digital currency has a faster block generation rate. It began in 2011 and is one of the top cryptocurrencies in use today. It shares many similar features to bitcoin, but it has a shorter block rate (litecoin’s block rate is 2.5 minutes versus bitcoin’s 10 minutes). This means that the litecoin can be processed and put into people’s digital wallets faster than the bitcoin can. Even though litecoin is cheaper than bitcoin, it is not as popular as Bitcoin, and thus, litecoin is used in fewer places than bitcoin.\

Peercoin is modeled after Bitcoin, but unlike Bitcoin, peercoin has no hard limit on how many peercoins will be mined. The only certainty is that peercoin is designed to eventually hit a target of one percent inflation. That could help the peercoin to last long term as a digital currency.

Namecoin is very interesting because it is the first prominent iteration of the Bitcoin model to serve a function beyond payments. It is designed to manage information access, as it utilizes all of the same Bitcoin principles to serve as a distributed Domain Name System (DNS). With this unique feature, it may survive on its own even if Bitcoin fails. There may be further variations of this type of model as well in the future.

One other interesting “Altcoin” that is not like Bitcoin and the other digital currencies is “Ripple.”

Ripple - has gained much venture capital from Google Ventures, Andreessen Horowitz, Lightspeed Venture, and other venture capitalists. It acts as a decentralized payment system and exchange to complement other currencies, both virtual and physical.

Ethereum was launched in 2015. It’s designed to run without downtime, third party interference or fraud. Like other digital currencies, it runs on a blockchain.

Dash is a bit more secretive than Bitcoin and it originally began as Darkcoin. However, it was rebranded in 2015 as Dash. Transactions are almost untraceable due to its mastercode network.

As you can see, there are more digital currencies out there than just Bitcoin, and it seems to be that there will probably be more in the future, both based on current digital currencies and even new ones.

As the world continues to become more “Digitized” in terms of the Internet and e-commerce, digital currencies will continue to gain more prominence and use. While replacing physical currencies is probably unlikely, especially in the near future, having more sites accepting digital currencies and conducting transactions using digital currencies is probably likely.

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