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By the end of this topic, you should be able to:
Understand the concept of a digital currency and how digital currencies are used
Understand the process of blockchain and how it is used to track digital currency transactions
Digital currency is money that only exists in digital form — this means it exists electronically on computers and devices, not as physical coins or banknotes you can hold in your hand.
No physical form: Unlike traditional money (like dollars, pounds, or euros in cash), digital currency exists only as electronic data stored on computers.
Stored electronically: Digital currency is kept in digital wallets or online accounts. A digital wallet is like a virtual purse that holds your electronic money.
No physical banknotes or coins: You cannot withdraw digital currency from an ATM as cash, and you cannot hold it in your hand — it's purely electronic.
Digital currencies can be used in several ways:
Paying for goods and services online: You can use digital currency to buy things from websites and online stores that accept it.
Transferring money internationally: Digital currency can be sent from one person to another across different countries quickly, without needing traditional banks.
Online exchanges: Digital currency can be exchanged (traded) for other currencies or for traditional money through online platforms.
Cryptocurrency is a specific type of digital currency. The main difference is that:
All transactions (payments and transfers) made using cryptocurrency are publicly available — anyone can see that a transaction happened, though they may not know who made it.
Transactions are tracked and secured using cryptography (special mathematical codes that keep information safe).
Examples of cryptocurrencies include:
Note: In your IGCSE exam, the terms "digital currency" and "cryptocurrency" are treated as the same thing, even though in real life they have some differences.
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