Understanding Virtual Currency, Crypto Currency and Digital Currency for beginners 101.

Virtual, digital and crypto currencies are currencies of the internet. Some people term them as one and the same while others tend to use them interchangeably. They are slightly different but linked in many ways.

Virtual Currency

Virtual currencies are fiction currency that is not physical like the fiat currency which is our bank notes and coins .They cannot be seen or felt .Virtual money are electronic money used in a virtual world and accepted by the members of the virtual community. These currencies are mostly used in games which are issued and controlled by its developer  .Virtual currency is unregulated by government or central bank but it is accepted as a means of payment, can be transferred stored or traded electronically.

 We have two types of virtual currencies, the fiction and the convertible virtual currencies. Fiction virtual currencies cannot be used to purchase goods or services but used in games examples  farmVille coin , world of warcraft and dollar dive .The convertible virtual currencies can be used to make purchases like the bitcoin and alternative coins known as altcoins like ethereum , litecoin , dash and ripple.

Digital Currency

Digital currencies are a form of electronic money or digital money that is available in digital form which is also not physical like fiat money. Digital money or e-money can be seen as an asset represented in digital form and has some characteristics of money. Digital money can either be centralized when is issued by the government and controlled by it used by conventional banks. Money in our accounts can be seen as digital money because the balance is recorded digitally and when we make purchases in online shops and make payment electronically from our account without the use of fiat currency. We also use digital currencies to transfer money from one account to the other using our mobile application, internet banking or even when the bank does the transfer for us. This is because no physical currency was used.

Digital money is said to be decentralized when the control comes from a block chain as in crypto currencies. Control of supply does not come from the government or any organization but from various sources. It could be any body. Crypto currencies can be used to make purchases of goods and services.

Crypto Currencies

Crypto currency is a subset of both digital currency and virtual currency. It is a digital asset that is base on cryptography a mathematical algorithm. It is a decentralized transaction base on data in a distributed ledger and not controlled by government, organization or any one. The first crypto currency is bitcoin created in 2009 and subsequently alternative coins called altcoins were created of which we have over 1384 coins and more are still created.

Similarities

1.They are not physical and can not be seen or touched 

2.They are used as means of change or payment for goods and services 

3.They are used as alternative to fiat currency 

4.They are used on the internet. 

Differences 

1. Decentralized transactions are transparent as it is public for any interested person to see while digital currency’s transactions are available only to the authorized person.

2. Legal action can be taken on digital currency because they are represented by recognized institutions and government with legal backing but crypto currencies are not control by any organization or government.

3. Block chain transactions are encrypted.

4. There is no trust in crypto currency so it is your responsibility to protect your wallet.

5. No identification is needed to open an account on the blockchain while you need required documentations to open account with conventional banks and there is a limit to the numbers of account you can have while for crypto currencies you can have as much as you want with no documentation.

6. Transactions are super fast with crypto currencies and have no limit while it takes a longer time with digital currencies which might need authorization depending on nature of the transaction and the amount involved.

7. Crypto currency transaction is irreversible and can be hacked with one’s coin stolen but with digital currency transactions are reversible and more secured.

7. The transaction fees paid in crypto currencies in cheaper that the fees paid in digital currency 's trasactions.