Digital currency (also known as digital money, electronic money, or electronic currency) is any cash, money, or money-like item that is handled, saved, and traded largely via the use of digital computer systems, particularly the internet, and is referred to as such. Digital currencies are classified into three categories: cryptocurrency, virtual currency, and central bank digital money. Digital money may be held on a distributed database on the internet, a centralised electronic computer database controlled by a firm or bank, inside digital files, or even on a stored-value card. It can also be saved on a digital wallet.
Digital currencies have characteristics that are comparable to conventional currencies, although they do not often have a physical form, as opposed to currencies that are printed on banknotes or struck on coins. Transactions through the internet may be completed very instantly because of the absence of a physical form, which also eliminates the costs involved with delivering banknotes and coins. Virtual currencies, which are often not issued by a governmental agency, are not regarded legal cash, although they do allow for the transfer of ownership beyond governmental boundaries.
It is possible to use this form of money to purchase tangible products and services, but it may also be confined to certain groups, such as for usage inside an online game, as well.
A digital money system may be centralised, in which case control over the money supply is exercised by a central authority (for example, a bank), or decentralised, in which case power over the money supply is preset or agreed upon democratically.