Introducing the Digital Currency

What is Digital Currency ?

If you were to look up the term ‘cryptocurrency’ you would get something like or similar to the following definition: A digital or virtual currency, that uses cryptographic encryption techniques to generate units of the currency and verify transactions. It is important to add however, that many use the term ‘digital currency’ interchangeably with ‘cryptocurrency’. Why it is important to make a distinction will be covered later, but first let’s substantiate the claim that the terms are used interchangeably.

If you were to type ‘digital currency’ into Google’s news search you would most likely receive articles about cryptocurrency and in particular Bitcoin. As can be seen below. I’ve taken the first 20 articles from google news (week of 20th feb), and taken their text using it in a word matrix. As can be seen from the matrix below ‘Bitcoin’ is the most popular topic associated with the term ‘digital’.

Digital currency before Bitcoin

If we understand that Digital currency is just an electronic representation of any asset, it is useful to point out and understand that digital currency can be traced back to the 1960s. Here are the main highlights I’ve found from research:

Achieving ‘distributed consensus’

Bitcoin was the first digital currency that functioned without a central mediator. Before Bitcoin came about there was no way to achieve distributed consensus without a centralized actor. Distributed consensus simply means a large pool of people who are geographically segregated agreeing on something. The way that Bitcoin solved the issues of trust that made a decentralized currency impossible to achieve was the invention of the Blockchain.

Bitcoin’s Blockchain

Bitcoin’s Blockchain is essentially applied three main cryptographic concepts to a single distributed ledger (an open ledger everyone has access to): Digital Signatures, Merkle Trees, and the cryptographic concept of Proof-of-Work.

Source : https://bookdown.org/Jack_Biggs/Cryptocurrency/how-does- cryptocurrency-function.html