what problems does digital money solve 
several systems already perform transactions with digital versions of money for example credit card systems let you purchase goods and services on credit wire transfer systems enable the movement of cash across borders such transactions are expensive and time consuming because they involve disparate processing systems the swift system a payments systems network consisting of various banks and financial institutions across the globe is an example each transfer conducted through the swift network has an associated charge swift member institutions also function in a patchwork of regulations each specific to a different financial jurisdiction moreover these systems are built on the promise of future payments ensuring a time lag for each transaction for example reconciliation for credit cards occurs at a later date and users can file chargebacks for transactions one of the aims of digital money is to do away with the time lag and operating costs inherent in current systems by using distributed ledger technology dlt in a distributed ledger system shared ledgers are connected via a common network to record transactions entities across jurisdictions can connect which minimizes processing times it also provides transparency to authorities and stakeholders because the ledger is stored on multiple machines it is difficult to alter them especially if they are secured through cryptographic techniques advancements in digital moneyone of the key advancements in dlt systems is historically linked encryption methods that chain blocks together called a blockchain blockchains improve the resiliency of a financial network because they make it very difficult to change records or access them a blockchain with a decentralized and distributed validation mechanism also solves the double spending problem where a digital asset can be spent more than once because there is no physical transfer when there is an extensive network of automated validators checking encrypted transactions linked by historical information double spending is not possible a large and powerful network is orders of magnitude faster than individual computers or small groups which cannot keep up with the processing rates of the bigger networks this speed makes a network uneconomical and exceedingly hard to hack third parties can be eliminated in transactions using blockchains and distributed ledgers blind signatures hide transacting parties identities zero knowledge proofs encrypt transaction details and encryption adds extra security examples of this type of digital money are cryptocurrencies like bitcoin and ethereum types of digital moneythanks to its technological underpinning digital money can be adapted to suit multiple purposes and can take on various forms besides the digital representation of cash currently used there are a few more and it is likely more will emerge central bank digital currencies cbdcs are currencies issued by a country s central bank they are separate from fiat currencies backed by the authority and credit of a central bank and are another obligation of the institution cbdcs are newborns when it comes to digital money some countries have implemented them but many remain vigilantly observant waiting to see how the idea works out in the countries experimenting with them there are even suggestions for different types of cbdcs for instance a type called a wholesale cbdc could be used in transactions between banks and financial institutions for wholesale payments large or high value payments between institutions retail cbdcs could be designed for daily transactions by consumers and businesses much like fiat currencies 4cryptocurrencies are a digital currency designed using cryptography they are more commonly becoming known as virtual currencies a subclass of digital currencies in an effort to distinguish them from officially recognized money 5the crypto wrapper around a digital currency provides enhanced security and makes transactions tamper resistant since 2017 the popularity of cryptocurrencies as an investment class has skyrocketed the market capitalization of crypto markets by november 2021 the market cap of cryptocurrencies had surpassed 2 7 trillion the crypto winter of 2022 saw the total crypto market cap drop under 1 trillion but it began recovering in 2023 climbing to more than 2 5 trillion in march 2024 6stablecoins are a variation of cryptocurrencies and were developed to counter the price volatility of regular cryptocurrencies stablecoins can be likened to a form of private money whose price is tied to that of a fiat currency or a basket of goods to ensure that they remain stable they can be a proxy for fiat currencies except they are not backed by governmental authority the market for stablecoins has exploded in recent times as of january 2024 168 stablecoins were listed on coinmarketcap the popular cryptocurrency data aggregator some of which were not showing activity 7advantages of digital moneythe current financial infrastructure is a complex system of many entities conducting transactions between financial institutions takes time and money because they work in different technological systems and regulation regimes the main advantage of digital money is that it speeds up transaction speeds and cuts back on costs other advantages of digital money are as follows disadvantages of digital moneythe disadvantages of digital money are as follows digital money and digital walletsdigital wallets serve as the cornerstone of the digital money ecosystem digital wallets are the primary interface where users interact with and manage their digital currencies they provide a secure environment for storing and managing digital money a fundamental aspect of digital wallets is their role in facilitating transactions obviously involving digital money users send and receive payments via their digital wallets by interacting with software interfaces consider how you ve sent money to a friend via popular banking or personal finance applications these applications may have digital wallets or similar technologies that facilitate transmitting funds one of the key advantages of digital wallets is their accessibility and mobility users have instant access to their digital money anytime anywhere as long as they have an internet connection this mobility empowers users to make transactions on the go using their smartphones or other internet enabled devices this concept is one of the primary benefits of cryptocurrency anyone around the world can have access to banking services which otherwise have been restricted in many areas of the world last security is paramount in the realm of digital money if it s really easy to move money it s easy for others to move your money if they get access to your account digital wallets may include encryption techniques multi factor authentication and biometric authentication methods to safeguard digital assets 