Nowadays, people do not want to carry cash in hand for many reasons. Managing cash is not only difficult, but also, it can get stolen. This increased the popularity of credit cards, debit cards, and internet marketing. However, now the digital currency is the trend, but what exactly is digital currency? Firstly, it is a broad term that includes anything of value in a digital manner. It also includes electronic money, a mere representation of fiat currency. Additionally, it also includes virtual currency like Nintendo points and cryptocurrency. Digital currency is not synonymous with cryptocurrency, but it includes it. Here is a look at the evolution of digital currency. 

Evolution Of Digital Currency 

The birth of digital currency took place around the 1960s when IBM and American Airlines joined hands to create the Semi-Automatic Business Research Environment System. In this system, office terminals used telephone lines to turn cash into virtual credit. This was the first look at the digital currency. Then, the first use of electronic money took place in the 1970s when banks, with the advent of technology, started using mainframe computers to track transactions between different branches. In the 1980s, France introduced Minitel terminals through which the customers could pay for the products from the comfort of their homes with the help of dial-up connections. 

Then a revolution occurred in the 1990s because of Digi Cash by David Chaum. He produced a digital currency through which anonymous fund transferring was possible. However, even though the idea was revolutionary, it was unpopular among individuals and companies. In 1998, PayPal developed a system that allowed its users to send money through the electronic medium for tasks like buying Lottery Sambad tickets just with the help of an email address. 

Finally, in 2008, the white paper for Bitcoin was produced by Satoshi. This marked the very first decentralized digital currency. 

Relevance Of Digital Currency 

Cryptocurrency, a form of digital money, has disrupted the global financial system. They are used as investments and can be used to purchase almost anything, including Dhankesari coupons, real estate and other services. What makes it unique is that it has taken back the power of both money creation and control from central banks across the globe. However, it has its own set of problems. For instance, it is such a democratized force that its usage is unregulated; therefore, along with positive activities, it can also be used to engage in harmful activities. To control the unregulated nature of cryptocurrencies, many governments worldwide are trying to introduce their own digital currencies that can be regulated. 

Not all but a few digital currencies can be used for quick, anonymous transfers, which holds true even for cross-border transactions. This eliminates the bank’s involvement in either blocking the transactions or charging a fee. This is a huge benefit for the users of digital currency. However, it also comes with a problem. For instance, prices of cryptocurrencies, including bitcoin, fluctuate very rapidly. Therefore, there is always a risk of the investment being a failure. As a result, most digital currency is considered a speculative asset and businesses that accept such currency do not use it to make payments. On the other hand, digital currencies are safe against inflation. 

Central Bank Digital Currency Will Soon Come Into Picture

To fight the problems of digital currencies like bitcoin, as discussed above, many central banks across the globe are planning to introduce their own digital cash, also known as central bank digital currency. This form of currency can match the speed of other digital currencies while eliminating the risk associated with it. Countries contributing to 90% of the global economy are considering starting a Central Bank Digital Currency. 

The work on it started to intensify back in 2019 when Facebook announced its own digital currency named Libra, which is now renamed Diem. Even though Central Bank Digital Currency looks safe for its user, it still is not entirely safe because it is always a risk of compromised privacy and cybersecurity attacks. Only time will tell how the government works on its own digital currency and its popularity amongst the citizens. Further, there are many forms of digital currencies and which form manages to turn the trust of the citizens will also play a key role in the future of money.