Ever wanted to know what is digital money? The evolution of money is one thing that has amazed the society today. Back then, the common means of exchange was trade by barter. As known, the barter system required the exchange of goods or services directly for other goods and services which served the society as a replacement of money.
This system lacked divisibility and also absence of common measurement on value which made it to be tagged as the worst replacement for money.
Evolution of Money Explained
Although the real definition of money was initiated from the barter system, and another term given to the barter system is commodity money.
When you talk of commodity money, it means there is a popular demand and usability for some particular groups of item, so therefore, any commodity (i.e furs, skins, salt, wheat, weapons etc) that was generally demanded and chosen by common consent was used as money. So, one of the main characteristics of money is being accepted generally, as it’s of no use if not generally accepted.
In due time, money had better replacements, and this evaluated from one phase to another, as innovation continues we begin to see better replacements such as metallic money (the use of precious metals as a means of exchange like gold, silver, copper etc), paper money aka fiat currency (currency that a government has declared to be legal tender, but it is not backed by a physical commodity, its value is also dependant on the relationship of demand and supply and not the value of the material), credit money (more like paper money but use of cheques) and plastic money (the use of credit/debit cards as a form of carrying out transactions).
Now, the next generation money which is already in jet-pack stage and set for full use in the global economy is the digital money.
Before I explain what digital money is and why you should invest in it, I want to let you understand that we are in a developed world that is developing on daily basis and still take our presence as underdeveloped, in other words, if you still dwell in the past age and ignore what the future holds, then your present and future is past.
Main looking at the evolution of money, you would notice the major keyword which includes “medium of exchange” and “general acceptability”.
Experts fought so hard to make the medium through which we exchange to be extremely simplified. Stage 1, we had to carry commodity about looking for opposite commodity almost equal to its value for exchange, then measurement of value was inaccurate, before we moved to stage 2, when we made use of gold, silver and other precious metals, but come to think of it, these metals was heavy, we had to journey over to stage 3 which we made use of paper (a more simply money) but come to think of it, plastic money became better because of its more simplicity as all paper money we has are backed up to the credit cards, now we are moving over to the use digital money.
What is Digital Money?
Another word for digital money or currency is cryptocurrency. This is the future money that exist in electronic form and not tangible like dollar bill or coin. However, digital money is accounted for and transferred using computers. It’s also but it´s designed for the purpose of exchanging digital information by a technology of the name BLOCKCHAIN.
It is a process made possible by certain principles of cryptography. Cryptography is used to secure the transactions and to control the creation of new coins.
The major advantage about digital money is the implementation of the blockchain technology which is basically a distributed database that forms an online ledger that maintains a continuously-growing list of ordered records called blocks.
Each block contains a timestamp and a link to a previous block. By design blockchains are inherently resistant to modification of the data and therefore – once recorded, the data in a block cannot be altered. All users in a blockchain are connected to each other and it uses state-of-the-art cryptography for secure transactions. So now we actually have a global, distributed database that can record the fact that we’ve done any form of transaction to anyone.
Why Should I invest in Digital Currency?
Digital currencies are being mined, and when you talk of mining, we talk of miners solving hashes of the next block. A hash is the word (can be noun or verb) for a cryptographic algorithm that produces a repeatable but non-reversible string of numbers and letters, in SHA256 the outcome is a 256 bit string.
So, the point I’m trying to point clear is that cryptocurrency units are very scarce units, even more scare compared to our physically mined metallic money. Guess what? This secures inflation as the units of the digital currency in circulation are few.
Let me take you back to economics, if you can recall the law of demand and supply as how commodity is affected in value, you should denote that, whenever there is increase in demand and scarce unit on supply, then the price or value of the commodity is affected positively, if this phenomenon continues, the price or value of the commodity would keep appreciating, same phenomenon is what happens to a crypto money as it’s a scarce unit.
The question is how do you know the digital currency to invest in? As we have over 700 cryptocurrency and it’s only few of them is successful. Look at what made them successful and you will get a positive thought on knowing which is best to invest in.
Remember, I discussed about the general acceptability as a characteristics of money, when you notice that there is high demand of a digital unit (which we know is said to be scarce as it’s difficult to mine), and not just that it’s on high demand for public trade, it’s also generally accepted by most merchants, so we don’t just trade the currency but also use as money in the purchase of goods and services, then that is what makes it a true cryptocurrency and best take for investment.
So, my clarity in all of this is that, it’s not all brand new digital currency you put your money in, but look at the ones with great strategy to build demand and also to emerge acceptance points, as long as this goal is certain, and then you can risk it.